June 28, 2022

Payment Fraud

Payment fraud is any type of false or illegal transaction. The perpetrator deprives the victim of funds, personal property, interest or sensitive information via the Internet. Payment fraud is characterized in three ways:

  • Fraudulent or unauthorized transactions
  • Lost or stolen merchandise
  • False requests for a refund, return or bounced checks

There are multiple methods of payment fraud:

Phishing: Any emails or websites that require personal or private information such as credit card, bank account or login credentials are prone to phishing. If the source is trusted, such as a partner with a bank, the website is trustworthy. However, if the source is unfamiliar, it could indicate an attempt at stealing information.

Identity theft: Identity theft exists outside of the digital realm as well, but it's a common type of fraud online. A cybercriminal who steals personal information and uses it under false pretense is engaging in identity theft. Hackers penetrate firewalls through old security systems or by hijacking login credentials via public Wi-Fi.

Advanced fee and wire transfer scams: Hackers target credit card users and ecommerce store owners by asking for money in advance in return for a credit card or money at a later date.

Merchant identity fraud: This method involves criminals setting up a merchant account on behalf of a seemingly legitimate business and charging stolen credit cards. The hackers then vanish before the cardholders discover the fraudulent payments and reverse the transactions. When this happens, the payment facilitator is liable for the loss and any additional fees.

A chargeback is a credit or debit card charge that is reversed by an issuing bank. This can happen when a cardholder claims a transaction was the result of fraud or abuse.

  • A chargeback is the name given to the payment amount that is returned to a debit or credit card, after a customer disputes the transaction or simply returns the purchased item.
  • The chargeback process is is started by either the merchant or the cardholder’s issuing bank.
  • Merchants incur fees from the card issuers when a chargeback occurs.

Implement 3D Secure authentication checks on your website to reduce online fraud and liability and comply with PSD2. Partner with a payment orchestration platform that lets you presonalize risk rules and also runs its own fraud check for every transaction.

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