This article was originally published October 9, 2017, on TotalRetail. It features Bambora CCO Ryan Stewart and his stance on the different types of fraud, the essential fraud tools, and the new solutions in fraud defense.
Is payment fraud getting you down? No wonder, 73% of companies were targets of payment fraud in 2015. Your odds are against you; it is no longer a question on “if” you will get targeted, but when and how hard.
Business owners can protect themselves, prevent chargebacks and avoid the loss of data. To do so, you need to understand the different types of fraud: Friendly Fraud, Account Takeover, and Stolen Financials. You can then implement the basic fraud tools like AVS and CVD. Once you have the basic fraud tools down, you can explore more advanced fraud defense strategies such as Wallets. Are you ready to start protecting yourself?
The different types of fraud
There are three main categories of fraud: Stolen Financials, Account Takeover, and Friendly Fraud.
Stolen Financials is when the credit card details are obtained and used to make a purchase. By and large, Stolen Financials are responsible for 93% of fraud.
Account Takeover is when a person gains control of someone’s account and makes a purchase. Account takeover makes up for 5% of fraud.
Friendly Fraud is when a cardholder, or family member, makes a purchase and request a chargeback after they receive the good. It accounts for about 2% of fraud.
This all boils down to understanding how your business is exposed to these threats, as well as the different fraud tools available to protect you.
Basic fraud tools
They may be basic and free, but that doesn’t mean they aren’t powerful. Ninety three percent of fraud is Stolen Financials, which usually means they have the number, not the physical card. Something as simple as asking for the CVD/CVV (the 3-4 digit code found on the back of a credit card) will prevent this.
This soon won’t even be a choice, as major card schemes are making it mandatory for merchants to collect the CVD. Starting October 2017, Visa is requiring all new merchants to collect CVD on all card-not-present transactions. Existing merchants will have until October 2018 to make the changes. Smart business aren’t waiting, and are making the change proactively to start collecting CVD on all online payments now.
Address Verification Software (AVS) can also protect your business from carding, as it requires the purchaser to enter the mailing address that matches what is on record with the card brand. Simple? Yes, but effective, as fraudsters often don’t have access to this information.
Now we get to the latest and greatest in fraud defense, Wallets. Wallets such as Visa Checkout, MasterPass, Apple Pay, and Android Pay are changing online payments for the better. They are handling the authentication for you, taking the majority of the burden away. Incorporating Wallets into your checkout will help combat Stolen Financials and Account Takeover.
Visa Checkout's fraud rate today is 63% lower than non-Visa Checkout payment volume. They are also a powerhouse tool when it comes to driving shopping cart conversions, helping you speed up checkout while demonstrating strong security to your customers.
If your business is online, it is important to have a suite of fraud tools working to protect you. The basics will drastically reduce your risk of Stolen Financials, as most fraudsters don’t have access to the physical card or personal details. Incorporating Wallets will take your checkout to the next level, and allow you to breathe easier knowing the authentication process is out of your hands.
Even with every tool in the market, you may still experience payment fraud, so it is important to continue to stay up-to-date with the latest payment and security trends. Protect your business, protect yourself, and don’t wait until it’s too late.