How Open Payments Platforms Combats Payment Fraud

Online payments are the most common method of transaction in today’s digital world, an Experian study reports 90% of businesses have a strategy in place related to the digital customer journey. Online marketplaces can be a hot spot for online payment fraud because of the numerous merchants and customers for criminals to take advantage of.

To protect customers and merchants alike, tackling the ever-growing threat of online payment fraud at the root requires a clear and specific understanding of how online payment fraud operates and how businesses can minimize it with an Open Payments platform.

Discover the 5 Different Forms of Online Payment Fraud 

1. Chargeback Fraud & Friendly Fraud: First-party misuse (also known as friendly fraud) generates up to 75% of all chargebacks Visa reported, making chargebacks one of the highest risks eCommerce businesses face. Chargebacks are practical for customers to ask for a refund when a product isn’t received or to get back stolen funds. The challenge arises with proving a chargeback is legitimate and not a situation of friendly fraud. 
2. Identity Theft: Fraudsters can steal the identity of merchants through numerous channels, such as setting up a fake account that appears real or acting as the trusted merchant by gaining access to the actual merchant account. Additionally, there are attacks that occur between the customer and the merchant to gather financial information from either one or both parties involved in the transaction.
3. Credit Card Fraud: Involves the use of stolen credit card information and is a complex category of financial crime because a collaborative effort between customers and businesses occurs to prevent it. The merchant uses a secure vault to store credit card information, while the customers need to be aware of bad financial habits and take proper security measures to protect their financial accounts.
4. Promo Fraud: Merchants offer promotions and fraudsters exploit these promotions by leaking one-time use discount codes used by numerous users, reverse-engineering of rewards like gift cards or cash for referrals, and creating many accounts belonging to the same user, but posing as different users to capitalize from signup incentives.
5. Account Takeover (ATO): Fraudsters obtain login details and “take over” the legitimate customer accounts and seek to take advantage by using payment methods on file to make purchases to their unused incentives like loyalty points or stealing the victim’s identity for personal gain.

How Merchants Can Minimize Online Payment Fraud With an OPP 

eCommerce merchants have a customer place an order and pay. Throughout this process they get help from customer service if any concerns or questions arise. It is indispensable that tracking and payments occur in the same system for audit and verification purposes because when your payment processing software is reliable it ensures customer data will not be compromised. Keeping the payment and tracking in one system reveals when a payment does not go through, so you don’t finalize an unpaid order. Here are five effective strategies to combat online payment fraud to protect your business:

• Flagging a large transaction is not enough to detect if fraud has occurred, the vital aspect is analyzing the patterns and context of the transaction to not miss any fraudulent activities. For merchants to ensure effective monitoring, you must have a clear understanding of normal transaction behavior.
• Use secure payment processors and pay the premium to access them because using low-cost payment processors typically means inadequate security measures for your transactions. Sensitive customer information can be leaked to fraudsters, therefore using reputable payment processors that comply with industry standards is ideal.
• Keep your software up-to-date and check on security systems to protect against any vulnerabilities. Exploitation is simple for fraudsters when merchants neglect keeping systems updated. 
• Educate employees and train them to understand the latest trends and tacts with online payment fraud, like identity theft and chargeback fraud & friendly fraud. When your employees are not educated, they unknowingly become victims of scams by mishandling sensitive customer information.
• PCI compliance is not efficient enough to keep your business safe and secure. Compliance checklists are a good place to start. However, you must put protective measures in place like ongoing verification of suppliers and customers, consistent use of encryption, and identification and verification of the type of devices used in transactions.

How Spreedly Optimizes Transactions Around the Globe

Spreedly’s Protect addresses fraud prevention, enhances payment security and improves customer experience by embedding fraud management tools into the payment orchestration process.

Our platform gets the right transactions accepted to capture more revenue by integrating fraud and 3DS management in a single API call for end-to-end performance.

Protect empowers merchants to mitigate fraud efficiently and maximize payment flows with optimized 3DS for approval rates, simplified compliance with SCA (PSD2) mandates, and get real-time, automated fraud decisioning in the payment authentication call.

Now Protect can build your payments stack with optimized, automated, and streamlined fraud management operations. Connect with Spreedly today and discover how to partner with the most powerful open payments platform.

Download the Payments Orchestration eBook Below