Payment fraud cost the UK economy £783.8 million in 2020, according to UK Finance. However, notable investments in advanced security systems helped protect customers from this type of fraud. The addition of real-time transaction analysis also paid off, as the banking and finance industry prevented around £1.6 billion of unauthorised payment fraud last year.

The reality is that any business that accepts card payments is susceptible to risks such as card fraud, chargebacks, refund fraud. Even the tightest security measures may not be enough to avoid this kind of fraudulent activity altogether. As an e-commerce merchant or business owner, there are a few simple things you can do to minimise the risk of getting hit by payment fraud.

These tips will help you stay safe so you can focus on growing your business:

1. Know your customers and watch for signs of fraud

You can protect your business from payment fraud by creating streamlined yet robust procedures for your employees to follow when accepting card payments:

In-Store: Ensure that the customers’ ID matches the card name and signature. Also, check cards for obvious tampering signs or damage, such as artificially attached magnetic strips or chips. If the customers’ ID doesn’t match the payment instrument, it may be that a stolen credit card is used for the transaction.
Online: Use the Address Verification Service (AVS) to ensure the cardholder’s billing address corresponds with the card. If for any reason, the two do not match, you can choose to decline the payment.

2. Establish a dispute resolution policy and flag suspicions

Disputes are a normal part of business – even if you make all efforts to avoid them, it’s crucial to have a solid dispute resolution policy in place. This policy should outline how you’ll deal with any disputes that may arise and establish the timeline for resolving any issues.

To weed out suspicious activity, try to set mechanisms for transaction reputation or a recency threshold for any purchase or sale. If you notice unusual activity involving a specific purchase, try to send an alert email or SMS to your customers through a trusted channel, letting them know something unusual has happened. When needed, requesting confirmations from your clients is an excellent deterrent for impersonation fraud, alongside showcasing your commitment to customer safety.

3. Use a secure payment solution

When selling products online, you’ll want to accept as many payment options as possible to capitalise on the various methods your customers prefer to pay. Before setting up a payment solution, it’s essential to understand what you need to protect against. All payment processing services have some level of risk, such as potentially compromised merchant accounts, unauthorised charges to your customer’s cards, payment fraud, and misuse.

Security is one of the most important factors when choosing a payment processor – this is the first line of defence against payment fraud. Many business owners prefer out-of-the-box solutions that follow market security guidelines. An added benefit is the use of Artificial Intelligence and authentication technology that stops fraud in its tracks.

Moreover, using specialised systems like Trust Payment’s 3 D Secure system will confirm the customer’s identity by using fingerprint authentication, voice or face recognition and biometrics, further enhancing your security efforts.

4. Analyse chargeback incidents

It’s important to take your time and thoroughly review any chargeback incidents – good evidence is vital in fighting against fraudulent chargebacks. Detailed records dramatically increase the chances for the payment processor to uphold your claim rightfully. All employees should know your company’s payment protocols and follow all policies for each and every transaction.

Guidelines surrounding chargebacks are updated regularly, so merchants need to monitor regulations and adjust their internal procedures to reflect the most recent rules. If your business’s chargeback rates increase, review your chargeback history and identify any trends – this will help build better defences for specific threats.

Although dealing with chargeback claims can be time-consuming, businesses that don’t take the time to manage disputes can experience unnecessary and painful losses to their bottom line.

5.Keep records of purchase information

It’s essential to keep records of any payment information for a complete customer profile and journey. This data doesn’t only help commercial decisions but also highlights any trends or weaknesses in your counter-fraud processes. You’ll want to make sure that you keep copies of any invoices you send out, as well as any receipts or documentation of the payments you receive.

Process gaps don’t have to be discovered after the fact – these can be prevented as your data pool grows through analytics and the earlier mentioned Artificial Intelligence. To accomplish this, clean data points throughout your entire customer journey are essential.

Payment fraud is a lucrative business for criminals – more often opportunistic, fraudsters will rely on businesses becoming comfortable or complacent with their fraud prevention efforts, exploiting process gaps for personal gain. Besides considerable losses, payment fraud could directly affect your clients through impersonations or the use of stolen payment instruments, often making it impossible to regain that lost capital of trust. Ensure that you pick the right partner and strategy to combat payment fraud and keep your customers safe – your business depends on it.