Do You Know About These 3 Kinds of Online Credit Card Fraud?

More than 40% of businesses revealed that over 5% of their transactions were fraudulent. This may come as a surprise to many, given the fact that it is only recently that EMV cards with embedded chips have been introduced with the aim of reducing credit card fraud.

Since security chips make it harder for criminals to use stolen cards in stores, most fraudsters have now migrated online where this measure has no effect – this, in turn, has increased the occurrence of credit card fraud compared to earlier times. Curbing online fraud can be a difficult feat to accomplish for merchants – their best bet against criminals is to know as much about the various kinds of online fraud, as well as about the habits of their customers, so that they can identify suspicious transactions.

Given below is a description of the three main types of credit card fraud:

1. Chargeback Fraud: Also known as “friendly fraud,” in this case, the customer falsely claims that he or she never agreed to the transaction. This kind of fraud has been seen to occur most frequently at companies that sell personal improvement products like dietary supplements or hair-growth aids. They are less common at organizations that sell high–end products like expensive watches or jewelry, for the simple reason that in this case, there is likely to be much more interaction between the customer and merchant. Moreover, with high-end transactions, the card-issuer is also likely to question the purchase.
   
   Large corporations defeat this kind of fraud by investing in software that costs hundreds of thousands of dollars – the system recognizes repeat offenders and flags suspicious transactions. But for small business owners who can’t afford such software, the best bet is to track customer habits on a regular basis so that they can spot unusual purchase patterns.

2. Account Takeover Fraud: Criminals have details such as account holder name and credit card number, and with these, they try to take over the account. Card numbers are either purchased from the dark web or obtained from stolen wallets and dumpsters. Fraudsters may get hold of email IDs from social media and use bots to generate the password. Else, they could call the credit card issuer and try and change customer information. Some criminals even build fake apps and list them on Apple and Google app stores. When an unsuspecting consumer tries to purchase products using these apps, he unknowingly provides critical information to the scammer.

3. Clean Fraud:When a site like Equifax (that contains sensitive information of consumers) is breached, it provides fraudsters with a treasure trove of details that include not only name and credit card numbers, but also Social Security numbers and answers to security questions. Armed with these details, it’s child play for criminals to commit fraudulent transactions.
   
   Apart from being aware of customer habits, the best way merchants can prevent online credit card fraud is by enabling security measures such as two-factor authentication. Many business owners feel that this step may alienate customers, but in reality, 58% of consumers are ready to accept whatever security measures are necessary to eradicate fraud. It is equally important to learn about best practices from payment processors, which keep up with the latest threats and defense strategies.

Though it is almost impossible to eliminate credit card fraud, it can be reduced to a large extent by remaining vigilant and implementing prevention techniques.

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