All businesses, large and small, have one thing in common: payment processing. The method of exchanging goods or services for money is fundamental to the success of any business. Accepting card payments is convenient for both the business and the customer, but there are some risks associated with accepting credit cards – for instance, payment fraud.
According to the 2023 Association for Financial Professionals Payments Fraud and Control Survey, 65% of organizations experienced payment fraud attacks/attempts in 2022, and 71% were victims of business email scams. Payment fraud involves false or stolen payment information to obtain money or goods. There are several types of payment fraud like phishing, skimming, chargeback fraud and even business email scams. We’ll take a closer look at some of these types of fraud and how you can best advise clients, or your organization, so they can improve the operation of their business and streamline efficiency.
Phishing
You’ve probably heard of phishing attacks and know that some of the methods used in phishing attacks include the use of fraudulent emails, text messages or fake websites to manipulate individuals into disclosing information like credit card numbers.
The emails and messages can often look like they are coming from a trusted source, like a bank or reputable business, and can include a link that they want the user to click on to update information or verify a recent transaction. The user is then redirected to the fake website where the fraudsters attempt to capture the credit card information or other sensitive personal identifiable information (PII).
How can you counsel your clients to prevent a phishing attack? Keeping up with the latest tactics used by fraudulent actors is a full-time job, because payment fraud tactics tend to evolve over time. Businesses can be on alert for emails and messages that have many misspelled words, suspicious links or even use threatening language. It can also be advantageous to align with a trusted payments partner that can provide guidance to you, and your clients, since they are regularly keeping up with scams and what fraudsters are attempting to do.
Skimming
Skimming is when a fraudulent actor attaches a device to ATMs or point-of-sale terminals, like a gas pump. The skimmer captures the card’s magnetic stripe data, which can then be used to create counterfeit cards or to make fraudulent payment transactions.
Preventing skimming can be a difficult task, so advising clients on how to detect skimming devices often comes down to some best practices that need to be implemented by the business. Advising clients to be on the lookout for loose or damaged card readers, extra devices attached to the payment terminal, or any equipment that doesn’t appear to be native to the payment terminal. Also, ensure that payment solutions that use EMV chip-enabled cards are being used. Accepting this form of payment is one of the most powerful safeguards against skimming.
Additionally, as an accounting professional, you can regularly monitor bank statements to ensure any irregularities or discrepancies are accounted for if your client uses a business credit card for purchases. Managing financial transactions that come into your client’s business, and go out from your client’s business, can be important when protecting against payment fraud vulnerabilities.
Chargeback Fraud
When a customer disputes a transaction, a chargeback is the typical result that a business must go through. In some cases, chargeback fraud will occur when a customer disputes a legitimate transaction, claiming they did not make the purchase themselves or they didn’t receive the product or service they were charged for. The customer will then receive a refund while keeping the product or service, resulting in a financial loss for the business, which is chargeback fraud.
When advising business clients, there are a couple measures of protection that you can have them implement. First, the business should verify the identity of the customer to ensure they are the rightful owner of the credit card being used to make the purchase. This means requiring a signature or the CVV code for any card-not-present transactions. Businesses should also have very clear policies around refunds and returns, while having a process for handling chargebacks. It is important to keep clear records of all transactions, including receipts, shipping information and any customer communications, in the instance they need to provide evidence during a chargeback dispute.
Business Email Scams
Business email compromise (BEC) is a type of payment fraud where emails attempt to trick employees into transferring money to fraudulent accounts. These fraudsters will go to extreme lengths to make their emails look as authentic as possible and will often claim to be some high level executive or vendor requesting an urgent payment or transfer. These scams are usually designed to exploit human trust in authority.
When guiding clients or helping your organization, one of the best tools against this type of fraud is education. Educate employees on how to recognize suspicious emails and implement strong email security protocols to help your employees be aware of the red flags associated with BEC. Businesses should also have a clear payment approval process that includes verifying payment instructions and where the payment is going. It should also be managed by an associate that has familiarity with the internal payment process.
Summary
As it is with all fraud, it’s important to monitor bank accounts for suspicious activity and to have a plan in place for responding to the types of scams listed above, and others. Working with a reputable payments partner can help you advise clients on crafting and executing a strategy that works. Payment fraud remains an evolving and persistent threat, but proactive measures can help to mitigate the risks and safeguard business assets. Some strategic thinking and working with the right partners can help shield the business from potential financial devastation.
Learn more about the benefits of aligning with Card Network as a payments partner here.