Modern innovations and technological advancements have grown in recent years, and so are cybercriminals’ tactics to defraud merchants and customers. However, there are ways to prevent these fraudulent attacks.
High-Performance Payment Processing + Robust Security Protocols for Fraud Detection = Success.
In this blog post, we’ll be looking at some of the best practices through which you can reduce the risk of fraudster activities and their impact on your business and customers.
Payment Processing Security – The Need of the Hour
Accepting digital payments is convenient for you and your customers, but the ease of payment processing comes with security breaches and fraud risks. While point-of-sale (POS) platforms help streamline payment transactions, they can also bring their challenges.
According to a KPMG study, nearly 72 percent of organizations witnessed cyberattacks. In recent years, the significant adoption of digital payment channels has highlighted the increasing risk of cyber threats.
Hence, merchants must focus on and manage to deliver a checkout experience that is simple and secure, as well as ensures protection for all digital payment methods.
Below are the three Factors that are critical to consider for reducing payment risks
Fraud management is critical to protect payment methods by offering additional buyer identification verification. A significant rise in fraud rates can result in credit card companies canceling the merchant’s right to process payments and ruining the business’s reputation.
As cybercriminals seek out vulnerabilities as an opportunity to fetch sensitive financial and personal data, merchants must ensure the payment process is secure and protect valuable business and customer data.
Data security and privacy standards governed by regulatory bodies are designed to protect businesses and individuals. Merchants must know their obligations and ensure they continue to comply with regulations everywhere they do business.
7 Best Practices to Remain Compliant in the Era of Payment Processing Security
Security is the primary concern when it comes to delivering an excellent online payment processing experience. The payment industry has witnessed multiple cyber-attacks, malware attacks, breaches, and other cyber threats.
Let’s discuss these practices in detail:
Encrypting data is the process that enables payment gateways to secure sensitive transaction data. The payment gateway encrypts the data once the user feeds its card details at the checkout.
Further, the data is turned into another form or code with encryption so that only people can access a secret key. The payment gateway will decode the transaction via its private key.
Implementing 3-D Security
3DS is a security protocol that provides an extra layer of protection to users from getting exploited during digital payment processing.
In this case, transactions are initiated and authorized after checkout through a dynamic one-time password (OTP) sent as a text message on the user’s mobile and e-mail account.
Merchants that process, store, or transmit credit card data must be PCI compliant. In case, any business not compliant with PCI regulations will face the penalties of a data breach.
Simply put, PCI standards are pre-defined rules and regulations that provide a framework to mitigate the risks of scammers and fraudsters stealing the users’ transaction details.
Payment processing service providers must abide by these rules; otherwise, they may have to avoid fines or penalties. In addition, they must ensure security plans adhere to PCI compliance regulations.
According to the PCI Compliance Security Standard Council, it is mandatory for a merchant to comply with PCI regulations for a successful process of credit card transactions.
Tokenization is an efficient security measure to prevent customer card data leaks. It converts sensitive information such as account numbers or credit card numbers with unique tokens that can be securely deployed into different devices or stored in the cloud. The token does not expose any actual account details.
Request the CVV
CVV is an acronym for Card Verification Value used to confirm card-not-present transactions online or on the phone. If the credit card numbers have been lost, asking for details that are only mentioned on the card can enable merchants to validate the payment.
No matter how robust a payment processing platform is, you cannot guarantee complete security. Once the transaction is completed, you must stay alert to prevent scams targeting consumers.
One typical scam could be carried out by an individual claiming to be tech support and attempting to convince you there is something wrong with your transaction.
To avoid such scams, ensure you don’t transfer your sensitive data, such as your password, and do not allow access to strangers of your computer remotely.
Monitor your orders
Monitor orders before shipping them, especially international ones. Plus, pay special attention to late night and early morning orders.
You should also require a signature upon delivery to ensure that the order is delivered and in good hands.
Provide updated product or service descriptions
Incomplete or mismatched descriptions increase the chances that the customer will file a chargeback. So, make sure that items on your website come with accurate and detailed descriptions.
You should also check your billing descriptors—they need to match your business name to make consumers simply recognize transactions on their bank statements. If customers don’t recognize your business name, they will most likely dispute a charge.
Send confirmation emails
Send email messages right after your customers place an order on your website. Include all transaction details to keep customers informed about the status of their transactions.
Provide shipping details
Customers want to know shipping costs and deadlines before they click the Pay button. Provide them with tracking information to keep them updated about where their package is and immediately inform them about delays.
Sometimes, fast shipping can help. People are impatient and waiting too long for ordered items may cause a dispute of the transaction.
Make a clear refund policy
Make your refund policy visible for website users and make it simple and easy to understand. Offer a refund when a customer isn’t satisfied with an ordered product. Provide detailed information on how to return the item and how to request a refund. It can help you prevent chargebacks and avoid negative reviews.
Set clear return policies. Return management can be less expensive and comes with less hassle than having to deal with chargebacks.
Keep all information regarding past orders
It’s good to keep details of past fraudulent activities to quickly recognize patterns and spot transactions that are considered risky.
Also, keep detailed records of all transactions, so that it will be easier for you to gather evidence and valid proof when a chargeback occurs.
As fraudsters are getting more and more sophisticated with their attacks, you should follow the latest trends. Doing so will help you understand how they can impact your business and be better prepared for mitigation strategies.
If you work with decent payment providers or fraud detection companies, you can rest assured that they strictly follow all the trends and regulations on the market. But even so be vigilant—it’s better to be safe than sorry.
Deal with customer issues promptly, as when customers know the status of their inquiries, they are less likely to file a chargeback. If possible, run a customer service 7 days a week 24 hours a day. If that’s not possible, state the support hours on your website and inform about an approximate time frame for addressing customer inquiries.
Address Verification Service
Wired. Com’s finding states that 49% of participants worldwide felt vulnerable while shopping online or making online transactions. Verifying provided details during the transaction can help mitigate the risks of potentially fraudulent activities and protect the business before fraud occurs.
Address Verification Service, or AVS, is a security protocol that helps prevent fraudulent transactions on digital payment platforms.
The platform compares the IP address with the billing address mentioned on the holder’s credit card to ensure that the customer is the cardholder.
The address verification is usually carried out to ensure authorization during a credit card transaction.
The merchant receives a code in response from the credit card processor and knows whether the transaction should be accepted or rejected.
Key Findings on Digital Payment Frauds Globally
- Digital payments fraud has tripled globally. It is forecasted to cost $40.62 billion in 2027 (Merchant Savvy, 2020).
- The global fraud detection and prevention market size post-COVID-19 global fraud detection and prevention market is expected to increase by $38.2 billion by 2025 (Markets and Markets, 2020).
- E-commerce businesses deal with around 206,000 web attacks monthly (Signal Sciences, 2019).
- Cyber fraud attempts increased by 48% monthly for mid-to-large retailers and 27% for smaller retailers (LexisNexis, 2020).
- 47% of organizations surveyed said they had encountered digital payment fraud in the past two years (Merchant Savvy, 2020).
What’s Your Next Move?
The road to adopting modern technology in a new digital ecosystem is not easy and comes with several challenges, as discussed above. So Keeping these best practices in mind will help you deliver a secure payment processing experience to some extent as the industry continues its upward course.
What should you know about chargebacks?
A chargeback was originally designed as a form of customer protection and occurs when customers dispute a charge on their bill. The reasons for chargebacks can be various, and one of them is fraud.
Chargebacks are always costly for merchants, and if the bank claims that a customer is right, the merchant will lose the sale and have to pay the chargeback fee.
You can limit the number of chargebacks, but it’s impossible to eliminate them completely. One of the most important things is to update your website and regularly fix errors.
How do you minimize payment risk?
Payment risk is a risk of loss due to some payment events. Many companies, especially ones that handle a high volume of online payments, have been forced to run their payment risk management strategies to avoid harsh consequences.
Keep in mind that every payment method involves risk, and it could be fraud or operational risk (when the financial loss is due to human or technical errors).