What is merchant fraud and how Infinity Data works to protect your business and your customers?
Merchant fraud can take many forms:
Credit card fraud
One of the most common types of merchant processing fraud is credit card fraud, in which criminals use stolen or counterfeit credit cards to make purchases. In cases of merchant fraud, stolen credit card numbers might be used to transact with fake businesses to defraud credit card companies. The prevalence of credit card fraud highlights the need for businesses to have tight security protocols and to be able to quickly detect and respond to suspicious transactions.
Account takeover fraud
Account takeover fraud Account takeover fraud occurs when fraudulent actors gain access to a customer’s account credentials, such as their username and password, to make fraudulent purchases. This type of fraud can be more difficult to detect, as it frequently appears as though the legitimate account holder is making the purchase.
Phishing scams
Phishing scams involve fraudulent actors sending emails or messages to businesses, often in an attempt to obtain sensitive information, such as login details or credit card numbers. These scams can be highly sophisticated and can fool even the savviest internet users, making phishing a significant threat to businesses and their customers.
Identity theft
Identity theft occurs when fraudulent actors get possession of an individual’s personal information, such as their name, address, and Social Security number, to make fraudulent purchases or open new lines of credit in their name. Identity theft can have devastating consequences for both individuals and businesses, highlighting the importance of strong data protection and privacy measures.
What types of businesses are affected by merchant fraud?
Merchant fraud is a growing problem that affects businesses of all types and sizes. While all businesses are at risk of merchant fraud, certain industries and business types tend to see the highest occurrence of fraud:
E-commerce
E-commerce businesses typically see a high occurrence of merchant fraud because online transactions are harder to verify than in-person transactions. Fraudulent actors can exploit vulnerabilities in the payment processing system to steal from businesses and their customers. Digital products, such as software or online courses, are particularly vulnerable because a fraudulent actor, posing as a legitimate customer, can claim they did not receive the product or did not find it satisfactory.
Travel and hospitality
The travel and hospitality industry is also at high risk of merchant fraud, as it often involves high-volume transactions and complex payment processing systems. Fraudulent actors may use stolen credit card numbers to book hotel rooms, flights, or rental cars. The hospitality industry has seen a year-over-year increase in fraud due to the fast-paced environment generally associated with this sector of business.
Retail
Retail businesses are also at risk of merchant processing fraud since they often sell high-value goods and also operate in a fast-paced environment that can make it more challenging to detect fraud in real-time. Fraudulent actors may use stolen credit card numbers to purchase high-priced items, such as jewelry or electronics, or may engage in “return fraud” by claiming they returned a product in order to receive a refund, without actually returning the product.
Digital goods and professional services
Businesses that sell digital goods and services, such as software or online courses, are also highly vulnerable to merchant fraud. In these cases, fraudulent actors might use stolen credit card numbers to purchase digital goods or may dispute the charge after accessing the product and receiving the benefit. The professional services sector has also seen a rise in fraudulent transactions. These are generally high-value transactions and involve many forms of digital delivery of goods and can be highly susceptible to organized (dark web) crime syndicates from offshore locations which makes the task of identifying and tracking this type of cyber-crime even more difficult.
How does merchant processing fraud hurt businesses?
Business reputation
Merchant processing fraud that involves fraudulent actors posing as legitimate customers can damage consumer trust, leading to a decline in sales and revenue. This is especially true in industries where merchant processing fraud is more prevalent. If a certain type of business becomes associated with fraudulent activity, then even legitimate businesses might have a harder time gaining and keeping consumer trust.
Financial losses and chargebacks
Businesses that fall victim to merchant processing fraud scams may be subject to chargebacks and other financial liabilities, resulting in revenue losses and additional fees and penalties.
Legal consequences
Businesses that fall victim to merchant fraud scams may also face legal consequences, such as fines or lawsuits if they are found to have been negligent in their fraud prevention measures.
Higher payment processing fees
The elevated frequency of merchant processing fraud in some industries or sectors can result in higher payment processing fees for legitimate businesses. Payment processors may charge higher fees to businesses in high-risk industries or to businesses that have a high incidence of chargebacks to compensate for the increased risk.
How Infinity Data protects businesses against fraud
For modern businesses, defending themselves against fraud means adopting the right operational protocols and tech solutions, both in-house and using third-party providers. For example, Infinity Data offers a variety of features and tools that can help businesses protect against merchant processing and transactional fraud.
Infinity Data fraud prevention technology
Our powerful technology deploys comprehensive fraud detection and leading-edge solutions to identify and block fraudulent transactions. It analyzes a variety of data points, such as the customer’s location, device information, and purchase history, to determine the likelihood that a transaction is fraudulent. If a transaction is flagged as high risk, Infinity Data can automatically block it or require additional verification steps, such as 3D Secure authentication.
Chargeback protection
Chargebacks can be a major nuisance for businesses, especially when they result from fraudulent transactions. Infinity Data offers chargeback protection, which protects businesses against fraudulent chargebacks. If a chargeback occurs, Infinity Data will automatically dispute it on behalf of the business, saving them time and money.
Real-time transaction monitoring
Infinity Data provides real-time transaction monitoring, which uses key data points to identify and flag suspicious transactions as they occur, such as those with high-value amounts or those made from high-risk locations. This decreases the amount of time between when a fraudulent transaction is attempted and when it’s detected.
3D Secure 2
Infinity Data supports the 3D Secure 2 (3DS2) on all payment APIs and Checkout, which lets businesses apply 3D Secure to high-risk payments. 3DS2 is the main card authentication method used to meet Strong Customer Authentication (SCA) requirements and allows businesses to request exemptions to SCA.
Cutting-edge customer authentication
For businesses that operate outside the US, customer authentication is another important consideration that Infinity Data supports. SCA is a requirement of the European Union’s Payment Services Directive 2 (PSD2), and it requires customers to provide two-factor authentication, such as a password or code, when making certain types of online payments. Infinity Data supports adherence to SCA, which can help businesses prevent fraudulent transactions and reduce the risk of chargebacks.
Customizable fraud rules
Infinity Data allows businesses to customize their fraud prevention rules to fit their specific needs. For example, businesses can set rules based on the customer’s location, IP address, or purchase history. This allows businesses to tailor their fraud prevention measures to their particular business model and risk profile.
Infinity Data provides a comprehensive suite of fraud protection solutions that continuously adapt to emerging threats. Our advanced system employs evolving tactics and parameters to help businesses proactively combat fraudulent activities across their entire commerce ecosystem. By leveraging Infinity Data’s expertise, companies can implement a robust fraud strategy without straining internal resources.
Legal Disclaimer
While Infinity Data Corp employs advanced technology and comprehensive measures to protect businesses from fraud, no fraud prevention system can guarantee 100% protection. Our services are provided “as is,” and we make no warranties, express or implied, regarding preventing fraudulent transactions. Effectiveness depends on proper implementation and adherence to recommended security practices. Users acknowledge that Infinity Data Corp is not liable for any losses, damages, or business interruptions resulting from fraudulent activities that may occur despite our preventive measures. For complete terms and details regarding our fraud protection services, please get in touch with us at 866.746.8931.