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Credit card fraud is still a major problem in this world. Merchants who accept credit cards must deal with this reality every day. The Nilson Report released the results of a study which showed that by 2020, credit card fraud will increase to a value of $31 billion. This is only a portion of the problem that merchants must deal with regarding credit card fraud.
There isn’t just one type of credit card fraud anymore. E-commerce business owners must address the increase of “Card Not Present” fraud, or CNP fraud. This pertains to credit card spending that takes place online. It means there are several channels of fraud which merchants must worry about.
If merchants are going to tackle this growing payment fraud problem, they need to set up the proper strategies which can help prevent fraud happening to their multiple merchant accounts. These strategies must also help them detect and manage fraud when it exists.
To help you out, we’ve collected some crucial information about what merchants should understand when it comes to payment fraud and the best strategies for staying ahead of the problem.
Common Types of Credit Card Fraud
EMV chip technology was designed to help reduce the number of credit card fraud incidents. Unfortunately, statistical data shows that this was not the case. Between the increase in identity theft fraud and CNP fraud, it doesn’t look like payment fraud is slowing down anytime soon. In 2006, the value of identity theft fraud cases added up to $16 billion. Credit card theft was the number one cause in this.
In 2017, another study revealed that American businesses pay $2.66 to fight every $1 of fraud. It doesn’t matter if these are big or small merchants. This kind of fraud can harm the bottom line for any merchant. When it comes to chargeback fraud, this can be the worst for merchants. Imagine if a customer falsely files a dispute against a purchase that they paid for with a credit card. Whether they’re scamming you or just forget they purchased the item, it still means you have to pay the money back in addition to losing out on your item.
The classic type of fraud is criminal fraud. This is simply where one person uses the credit card of another person to make a purchase without their consent. The result of such an action is a chargeback to the merchant. Not only that, but the merchant will negatively affect their relationship with their merchant account provider.
Account fraud is on the rise as well. This happens when a person gains access and takes over the account of another person without their consent. The fraudulent person does this to make multiple purchases over a long period of time.
All these types of fraud are why payment fraud is increasing so much. Merchants need to be more prepared than ever.
How This Increase in Fraud Effects Business Growth
If the account that a customer has with a merchant is compromised, then you can be sure the customer won’t trust that merchant anymore. As a result, the reputation of the merchant is damaged. The word-of-mouth will spread quickly about that merchant by customers who’ve had their accounts hacked or used illegitimately. No one will feel safe doing business with that merchant anymore. Without the trust of customers, a merchant cannot build customer loyalty.
The troubles don’t stop there, though. Merchants also see their relationships ruined with payment providers and the payment industry as fraud continues to grow. If merchants don’t put safeguards in place to prevent fraud, payment providers may flag their accounts if they’re deemed to be problematic. This means more fees charged to the merchant or maybe even the termination of their accounts altogether. Acquiring banks take on more potential liability when there is a lot of fraud. For this reason, it is crucial for merchants to find the best payment processing partner.
The Benefit of Choosing the Best Payment Processing Partner
You must consider security when picking a payment processing partner for your business. Make sure your partner provides innovative security technology which is the best in the industry. You need to be sure that your payment systems do their best to protect your customers. Therefore, be sure that your payment partner has the most up-to-date security features.
Merchants need to recognize security protocols in this technology. Some of which include tokenization features, PCI compliance, and point-to-point encryption. Find a payment partner that can provide you with highly advanced security tools, like an embedded iFrame or secure card vault.
Merchants will always need to face payment fraud to some extent. However, it doesn’t need to be a complete burden if you choose the right payment processing partner. That way, the merchant can let the partner focus on payment security matters while they focus on their business. Meanwhile, customers have a better shopping experience because they have peace of mind knowing there is a lower chance of fraud.
Our Commitment to Reducing Fraud
At IntegralPay we work with the industry standard tools to help you prevent credit card fraud before it's too late!