How to protect your business from payment fraud

What is payment fraud? 

Payment fraud is a growing problem for businesses, so it’s important to equip yourself with the knowledge and tools to reduce the chances of it happening to you.

It occurs when someone intentionally uses fake or stolen payment information, such as credit card details, to make a purchase. It can lead to huge financial losses for companies and can happen in a number of ways.

Fraudsters can use information from credit cards, debit cards, or bank accounts to make payments. They may employ any of the following methods:

• Identity theft: Where a fraudster steals someone’s personal information, such as their name, address or credit card details. They can use this information to open new credit accounts or make unauthorised purchases

• Skimming: This involves using a device installed on a payment terminal to steal credit or debit card information. Criminals then use the stolen details to make fraudulent payments and cash withdrawals

• Phishing attacks: Typically involve emails, text messages or social media posts with links to fake websites that enable fraudsters to collect customer data

• Account takeover fraud: When a fraudster tries to log into your online banking or email accounts to make fraudulent transfers and payments

• Chargeback fraud: When a customer makes a purchase using a credit or debit card but then disputes the transaction with their card provider or bank, claiming it was unauthorised, in order to get a refund. The business then has to pay out, even though the transaction was legitimate

Card fraud can happen online, over the phone or in person. 

Card-not-present fraud occurs when someone makes an online or phone transaction without showing their physical card. All they need to make the purchase are the card details. 

Card-present fraud, on the other hand, occurs when someone steals a physical card and uses it to make unauthorised transactions. 

What are some of the signs of payment fraud?

It’s important to keep an eye out for the following signs as these could indicate payment fraud:

• Unusual spending patterns: For example, if a customer who usually only makes a single purchase once a month suddenly puts in several orders in one go

• Orders from high-risk countries: Watch out for orders from countries where you don’t usually conduct business. They could be genuine, but you should investigate first

• Urgent orders: Requests for priority shipping could be a red flag. Fraudsters want to receive goods urgently so they can dispose of them quickly 

• Several small or one unusually large order: Some fraudsters might place many small orders, hoping they will go unnoticed, while others might request an unusually large and high-value order. These can be worth checking out

Do credit card companies offer fraud protection? 

Yes, many credit card companies and payment networks offer fraud protection. Mastercard and Visa, for example, both offer zero-liability protection. This means the financial institution that issues your card won’t hold you responsible for any unauthorised transactions carried out on your account. This applies to purchases made in store, over the phone, online or via a mobile. It also covers withdrawals at an ATM.

However, keep in mind that this protects the cardholder – it won’t protect a business if they accept a fraudulent transaction. The cardholder must also have used reasonable care in protecting the card from loss or theft and report the loss or theft to the card provider quickly. With Visa, your bank or card provider must replace any money taken from your account as a result of an unauthorised payment within five days. 

Similarly, American Express offers a Fraud Protection Guarantee, which also means you won’t be held responsible for any fraudulent transactions carried out on your card.