Payment Fraud Detection & PreventionHow to Fight Payment Fraud Proactively
Our Top 10 Best Practices for Payment Fraud Detection & Prevention
After learning about the tactics and the staggering costs of fraud, it’s easy to feel overwhelmed. But merchants are far from helpless. A layered, intelligent set of defensive measures, for example, can help you detect fraud in real-time or even prevent it from happening in the first place.
There are a lot of things you can do here. In fact, there’s so much you can do on the payment fraud prevention front that you might end up suffering from analysis paralysis. Not to worry, though: I can make it easy for you.
In this last chapter, I’ll share my top ten tips for deterring payment fraud.
Payment Fraud
In this guide, we take a look at what payment fraud is, how it works, and how it impacts merchants. We’ll also share tips and best practices you can use to identify, detect, and prevent these tactics from harming your business.
Our Top 10 Tips to Stop Payment Fraud
Even if payment fraud isn’t the only threat facing one’s business, it’s probably where merchants need to start the risk management process.
Identifying chargeback triggers like friendly fraud and affiliate fraud usually depends on eliminating other legitimate threats first. You must rule out legitimate fraud claims before you can address false ones. In other words, many fraud tactics can’t be identified without ruling out payment fraud first.
To that end, here are eight simple tips to help prevent payment fraud and protect your business against loss:
#1 | Encourage Account Creation
You should encourage buyers to create an account before making a purchase. This will help prevent one-off, “run and gun” fraud attacks. Accounts should also require strong, unique passwords.
#2 | Use Multilayer Fraud Detection
Employing complimentary fraud detection tools like geolocation, velocity limits, address verification, and fraud blacklists can help you flag fraud cases and prevent loss.
#3 | Employ Fraud Scoring
Along with the fraud detection tools mentioned above, you should also make use of fraud scoring. This tool examines fraud indicators and generates a simple numeric score for automated, up-or-down decisioning.
#4 | Educate Yourself
You need to stay up-to-date on the latest payment fraud trends and new schemes. This will help you identify new and developing threats before they negatively impact your bottom line.
#5 | Use 3-D Secure
This technology (branded as Mastercard SecureCode and Verified by Visa) is an opt-in program that adds additional verification to the checkout process. Think of it as a PIN code for a card-not-present purchase.
#6 | Require Regular Password Changes
The longer a password goes unchanged, the more likely it is to be compromised. You should require customers to update their passwords regularly, and also verify account information to make sure nothing’s changed.
#7 | Maintain Compliance
Ensure that everyone in your organization is up-to-date with PCI-DSS compliance standards and knows how to handle sensitive data. This can help prevent bad actors from gaining access to an internal email account, for instance.
#8 | Embrace AI Fraud Detection
Couple human expertise with fraud detection machine learning and transaction monitoring software so that you can subject 100% of your transactions to real-time screening. Doing so can help you automate away fraud decisioning for simpler threats and allow your fraud analysts to refocus on more sophisticated attacks.
#9 | Perform Liveness Checks
Hardening your account creation and checkout environments with passive liveness detection systems can help you stop payment fraudsters who use synthetic identities. For even greater security against sophisticated scams like presentation attacks, consider introducing active liveness checks instead.
#10 | Seek Outside Expertise
There are some facets of fraud management that will be outside your wheelhouse. We strongly suggest seeking third-party support to manage more complex fraud challenges like friendly fraud and affiliate fraud.
In this post, we explored how fraudsters manage to carry out payment fraud schemes, as well as some of the most common tactics they use. We also looked at fraud threats outside the realm of payment fraud, and some practical steps you can take to reduce your risk.
Have additional questions? Check the FAQ below, or get in touch with the experts at Chargebacks911 to see how you can help manage fraud, reduce chargebacks, and recover revenue.
