Scam-proof Your Business: Strategies for Preventing Card Payment Fraud
Card payment scams are a growing concern for businesses of all sizes. These scams involve criminals using stolen or fake credit card information to make fraudulent purchases. Businesses that fall victim to these scams not only lose the revenue from the fraudulent purchases, but also have to deal with chargebacks and other financial penalties.
Let me first share some data to give an idea of the scope of the problem:
The most recent study by the Nilson Report found that global card fraud losses reached $32.34 billion in 2021, about a 14% increase over 2020, when losses totaled $28.43 billion. In the U.S. alone, 2021 fraud losses totaled $11.91 billion.
According to the United Kingdom's Financial Fraud Action (FFA), card fraud losses in the country reached £479.4 million ($622.1 million) in 2019, with online shopping and remote banking being the most common types of fraud.
A report by the European Central Bank (ECB) estimated that card fraud losses in the European Union (EU) reached €1.82 billion ($2.1 billion) in 2018. Of that amount, €1.26 billion ($1.5 billion) was attributed to card-not-present (CNP) fraud, such as online shopping and phone transactions.
According to a report by the Australian Payments Council, card fraud losses in Australia reached $479.9 million in 2019, with CNP fraud accounting for 79% of those losses.
The Reserve Bank of India (RBI) reported that card fraud losses in India reached INR 2,059.5 crore (approximately $280 million) in 2019-2020, with skimming and phishing being the most common types of fraud.
So, what are some of the most common types of scams?
Skimming: This type of scam involves criminals attaching a small device, known as a skimmer, to a card reader, such as an ATM or gas pump. The skimmer captures the credit card information of unsuspecting customers, which is then used for fraudulent purchases.
Phishing: This type of scam involves criminals sending fake emails or text messages that appear to be from a legitimate source, such as a bank or credit card company. These messages typically ask for personal information, such as credit card numbers, passwords, or social security numbers.
Triangulation: This type of scam involves criminals who use a small device, known as a "shimmer" to steal credit card information from contactless payments, such as those made with mobile wallets, like Apple Pay or Google Wallet. Criminals place the shimmer between the card and the reader to capture the data from the card.
E-commerce fraud: This type of scam involves criminals who use stolen or fake credit card information to make online purchases. This type of scam can be particularly difficult to detect, as the transactions take place over the internet, and it can be hard to verify the identity of the person making the purchase.
Refund fraud: This type of scam involves criminals who make a legitimate purchase with a stolen credit card, and then request a refund for the purchase, using a different name and address.
Card-not-present fraud: This type of scam involves criminals who use stolen credit card information to make purchases over the phone, online, or via mail order. This type of fraud is becoming increasingly common as more and more purchases are made online.
Card swapping: This type of scam involves criminals who steal credit card information by physically swapping a customer's real card with a fake one, typically at a busy location such as a restaurant, bar or nightclub.
Card-testing: This type of scam involves criminals who use a large number of stolen or fake credit card numbers to make small purchases from a business. They are looking for cards that have not been cancelled or reported as stolen, which they can then use for larger fraudulent purchases.
Card cracking: This type of scam involves criminals who use a stolen credit card to make a large purchase from a business, and then request a chargeback from the card issuer, claiming that the purchase was unauthorized.
Businesses can take a number of steps to protect themselves from card payment scams. One of the most important is to implement a strong fraud detection and prevention system. This might include using advanced analytics to identify suspicious patterns of behavior, such as a large number of small purchases made with different credit card numbers.
Another key step is to ensure that your business is PCI compliant. PCI (Payment Card Industry) compliance is a set of security standards that businesses must follow in order to accept credit card payments. By following these standards, businesses can reduce their risk of falling victim to card payment scams.
Additionally, businesses should be vigilant in monitoring their transactions and reports for any suspicious or fraudulent activities. If suspicious activity is detected, the business should investigate and report it to the relevant authorities immediately.
Another way to mitigate the risk of scam is to use a third-party payment processor that provides fraud detection and prevention services. This can help to protect your business from card payment scams and also help you to stay PCI compliant.
It's also important to be aware of the typical red flags of card payment scams. These can include:
Large numbers of small purchases made with different credit card numbers
Transactions that are significantly larger than normal
Transactions that are made outside of normal business hours
Transactions that are made from a different location than the one where the card was issued
Finally, it's important to educate your employees about card payment scams. Make sure that they are aware of the typical red flags, and that they know what to do if they suspect that a card payment is fraudulent.
In conclusion, although card payment scams are a growing problem for businesses of all sizes, these can protect themselves by implementing strong fraud detection and prevention systems, ensuring that they are PCI compliant, and educating their employees about card payment scams. By taking these steps, businesses can reduce their risk of falling victim to these scams, and keep their finances safe.
