- November 15, 2018
- Posted by: ipaytotal
- Category: E-Commerce, Fraud Prevention, high risk merchant account provider, high risk merchant account solutions, high risk merchants uk, online payments
The past few years have been booming for online business. E-commerce is now, more than ever, enjoying the convenience of processing and accepting online payments. They now have the advantage of trading all around the world, with funds being immediately transferred to their accounts.
But even with an increase in revenue, there are significant risks. Online payments are evolving and so are payment processing frauds. The fact that online payments do not require the physical presence of the card allows fraudsters to steal. Fraudsters can now get their hands on your social security numbers or mother’s maiden name if it is not securely hidden on the internet.
Even with the most sophisticated fraud detection mechanisms, cybercriminals always find a way to steal from unsuspecting merchants. So, to protect your ecommerce business from fraud, you need to understand the latest forms of online fraud. It is essential to recognize the fraud risks of card-present and card-not-present transactions.
So, What is Card-Present and Card-not-Present Transaction?
In business, it is vital to protect yourself and your customers from fraud. Fraudsters are always on the prey awaiting the right opportunity to commit a crime. So, by learning about card-present and card-not-present transactions, you can easily detect, prevent, or eliminate fraud.
Card present transactions occur when a customer’s card is available during purchases. For frauds to happen in the card-present transactions, the criminal needs to get their hands on your card and use it for payments.
However, card-present frauds are becoming fewer by the day because of the introduction of secure EMV(Chip) cards. But for countries still using magnetic stripe cards, the frauds are still proving difficult to control.
Card-present frauds occur in many different forms. The fraud can be carried out through:
- A lost card or a stolen card that is then used to make online payments.
- Skimming where a fake magnetic stripe, with your details, is created and used to make payment in brick and mortar stores.
- ID theft where the details of your card are stolen and used to create another card. The new card is then used to take over your bank account.
- The card-non-receipt where a card is stolen during delivery. The stolen card can either be a new card or a replacement of an old expired card. The cards are mostly stolen in the post.
The card-not-present transactions happen when the merchant does not physically put their hands on the card. The transactions mostly occur online and are the culprits of most frauds. The frauds occur because merchants cannot verify the details of the cardholder because they are not physically present during payments.
Latest Forms of Card-not-Present Online Frauds
The sophisticated use of advanced technology has made it possible for ecommerce businesses to secure systems from fraudsters. On the other hand, advanced technology has also allowed fraudsters access to cardholders’ information. Fraudsters are keen on delays in the update of payment processing systems. They are fast in carrying out fraudulent activities when you least expect it. Here are payment frauds you can expect during online payments:
It is common for customers to purchase products online frequently. What is even more common is the use of the same logins and passwords to access different sites. Fraudsters are aware of these, and they take the advantage to steal your information. Once they have their hands on your credentials, they will contact your credit card company, change your address, and finally apply for a new card. With the new card, they quickly take over your account and make purchases before they are detected.
The triangulation involves three parties; an unsuspecting customer, a fake merchant, and the stolen data. The unsuspecting customer first places an order with the fake merchant. The fraudulent merchant processes the payment, but since their interest is in the unsuspecting customers’ data, they cancel the transaction. They mostly cancel the transaction after getting their hands on the customers’ credit card details. With the stolen data, they create new cards and use them to access the customers’ bank account.
It is normal for ecommerce to have chargebacks. But fraudsters are also using chargebacks to defraud businesses. Friendly fraud involves false chargebacks. In other words, a criminal will raise a dispute with their credit card company canceling a legit transaction. The claims they raise can be of a wrong item delivered, damaged item, undelivered items, or a refund not given. The bank then issues a chargeback. To the merchant, friendly frauds lead to direct losses because the product or service was delivered to the customer. It can also lead to suspension of merchant accounts if the chargebacks are common.
As the name predicts, clean fraud is hard to predict because cybercriminals use real data to commit fraud. Criminals that carry out clean frauds are highly knowledgable on every detail needed to make a transaction appear legit. Since most of those frauds are well planned, it takes quite some effort to realize and resolve.
In card testing, a criminal target compromised cards to confirm if they can transact with them. They make small purchases using old or expired cards to test if they are still active. When a transaction is approved, the criminals now make massive purchases. Most merchants may not be aware of the numerous transactions, but experienced payment processing companies know how to identify the transactions. Due to the increase in payment requests, the payment provider can decline all transactions from the merchant. The effects are a loss of revenue and reduced conversion rates for the period of suspension of the merchant account.
In identity theft, the fraudster creates a false identity and uses it to create a bank account and later a credit card. They use the card details to order for products online and disappear when the transaction is approved. Most times, the card issuer covers the loss because they registered the card. But at other times, the losses are incurred by the bank or merchant.
Online Fraud Detection Tools you Need to Know About
Seek the services of a reputable payment gateway to secure your system from fraud. A payment gateway, with a reputation of dealing with cybercrimes, can mitigate the effects of the latest online frauds. Partner with a payment gateway such as ipaytotal that has an expert solution to the security threats in online payments.
A more advanced tool for online fraud detection is machine learning. Machine learning covers two aspects, supervised and unsupervised. The supervised machine learning involves a look into the history of various online payment data to confirm if they match. The confirmed data can include email addresses, card numbers, billing addresses, or users’ device IDs.
Though supervised machine learning works well to detect card testing fraud, it still has its downside in detecting most friendly frauds. That is why a collaboration of supervised and unsupervised machine learning is recommended.
Unsupervised machine learning checks for unusual activities. The unusual activities could include a high volume of transactions from a particular card number, thus signaling fraud. Without the integration of supervised and unsupervised machine learning, it is difficult for payment processes to be safe.
How to Prevent Online Payment Fraud
- Keep your system up-to-date by using a well managed IT system to supervise your computer programs.
- Stay informed with the latest types of online payment fraud and how to prevent them.
- Have an open line of communication with your customers to make it easy for them to raise disputes.
- Have an organized product delivery system that can even request for signatures once goods are received.
- Partner with a payment gateway that is highly recognized for dealing with the latest forms of fraud.
- Advice your customers on the importance of strong passwords.
- Regularly review previous fraud attempts to stay clear of similar fraud activities.
Fraud can happen at any stage of payment. As a payment processing solution, it is your responsibility to detect fraud before it happens and protect your business and customers. With the best fraud detection tools integrated into your payment solution, it is possible to stop cybercrimes in real-time. A great payment gateway with supervised and unsupervised machine learning is essential for tracking every transaction.
But even with all the advanced tools, it is still necessary to learn the latest forms of online fraud. Keep a close eye for the newest payment frauds. Understand the signs of each attack and how to prevent them.
For chargebacks, create a precise method of dealing with disputes. Request for a notification from your payment provider every time they receive a chargeback. Have an experienced payment processing solution that can dispute chargebacks that are not genuine. Look for a payment gateway that protects or reduce the losses associated with the fraud.
For years, ipaytotal has been a trusted company for dealing with online fraud. They have successfully managed frauds through real-time detection, prevention, and elimination. Yes, it is possible to stay safe from fraud using the tips mentioned above. But, it is more secure with a payment gateway such as ipaytotal helping you. Talk to us and let us share professional thoughts on how to deal with the latest online frauds.