Fighting fraud could be one of your business's biggest challenges. New online theft tactics seem to arise all the time, making it difficult to detect suspicious payment activity.
In this expert guide, we’ll explain the different types of payment fraud so you'll have the tools to raise a red flag when necessary. We also provide strategies your business can use to stay safe, going beyond the basics to help you exceed industry-standard security.
What Is Payment Fraud?
Payment fraud involves stealing money or property from a person or business through an illegal transaction. This type of fraud often takes place online and could include fake refund requests, bounced checks, stolen goods, unauthorized purchases, and fraudulent credit card transactions.
Both consumers and business owners experience the effects of payment fraud. If someone buys from your ecommerce shop with a stolen credit card, the cardowner may dispute the purchase with their card company. You'll be liable for the lost income along with expensive chargeback fees.
Shielding your business from payment fraud improves your chances of long-term success.
Different Types of Payment Fraud
The most common forms of payment fraud include:
- Card-present fraud: the use of a stolen credit card for an in-person transaction at a physical business
- Card-not-present fraud: the use of a stolen credit card or card number for an online or phone purchase
- Chargeback fraud: occurs when someone buys items with their own card, then falsely requests a chargeback so they can keep the items for free
6 Ways to Protect Your Business from Payment Fraud
A strong strategic approach can reduce your risk of payment fraud. We recommend these 6 safety tips for ecommerce businesses.
1. Maintain Separate Business Bank Accounts
You should always keep separate personal and business bank accounts to easily track expenses and income. If fraud affects one of these accounts, the other will stay safe. Having separate accounts also limits your personal liability for business debts and financial obligations (lawsuits, for example).
Make sure both your personal and business accounts have strong security measures, like logging you out automatically after a period of inactivity. You should also establish a security policy for employees who use business accounts and add fraud protection to company credit cards. Sign up for online billing to prevent theft of paper account documents.
2. Review Statements Frequently
Keep tabs on your business accounts and look for transactions you don't recognize. Regularly reconcile credit card statements so you can identify and report potentially fraudulent purchases.
If you see something that doesn't look right, make sure you check all your company accounts and systems so you can locate and fix the breach. Alert your payment service provider and financial institutes immediately if you think you've been impacted by fraud.
3. Implement Multi-Factor Authentication
Multi-factor authentication (MFA) ensures that people who enter credit card details on your site are the actual cardholders.
Pay.com supports 3D Secure 2.0 (3DS2) to protect your business from fraudulent transactions. This system keeps an eye on transactions and requests extra authentication when needed. For example, 3DS2 may take effect for purchases of unusually large amounts or from unexpected locations.
4. Stop Storing Credit Card Data
Never store customer payment details on your business servers. Doing so dramatically increases the risk of data theft and goes against industry security standards. Stolen credit card numbers can cost your company and your customers thousands of dollars. This type of breach also damages your business reputation.
When you work with Pay.com, you enjoy the benefits of our Level 1 PCI DSS compliance. We never store payment information on our platform, so credit card details stay safe.
5. Keep Hard Copies Safe
Ecommerce transactions have an increased risk of payment fraud, but it can occur offline too. Paper checks, credit card statements, and bank account documents can all be stolen and used for payment fraud. Consider switching to electronic statements. If you need to print or store paper copies, get a good shredder and locked filing cabinets.
6. Tokenize Transactions
Pay.com takes security seriously with high-tech features like tokenization. This system encrypts payment details during transit, so even if a hacker intercepts the data, they won’t be able to read it and steal credit card numbers.
The Benefits of Working with Pay.com as Your Payment Service Provider
Pay.com gives you a flexible payment infrastructure with built-in fraud protection. You won't have to handle industry security compliance on your own. We adhere to Level 1 of the PCI DSS with authentication and tokenization.
Here are some more benefits of choosing Pay.com:
- The ability to accept many different payment methods, including digital wallets, credit cards, debit cards, and bank transfers.
- A powerful API that lets you embed our payment components into your own website or application
- Transparent flat-rate fee structure designed to keep payment processing affordable
- Detailed reporting with customer insights on your intuitive Pay Dashboard
The Bottom Line
Payment fraud protection is an ongoing concern for business owners. Although it can be challenging to stay on top of the countless types of fraudulent transactions and scams, you can reduce your risk of financial loss with these eight strategies.
Selecting a strong payment system gives you the advantage of solid fraud protection. Pay.com has the innovative tools your business needs to fight fraud. We'll help you keep your customers’ details secure and prevent serious financial loss. Click here to create your account now!