Credit card fraud – a common modern threat
The rise in the number of consumers that use the internet to acquire services and goods cannot be denied. This substantial increase has forced businesses to adapt their operations in order to keep up with demand, with many of them opting to digitize their processes to make things easier.
There are benefits, as well as drawbacks:
The issue of credit card fraud
Although there are many cyber security methods, such as identity verification and multi-factor authentication, these will not assure 100% online safety, if businesses do not care about their own financial protection. Credit card fraud is more common now because the card holder doesn’t need to be present or show ID when making an online purchase.
Identity fraud is a serious problem in countries like The United States, with 14.4 million people falling victim to it in 2018 alone. The most common form of identity fraud is credit card fraud (29.1% of cases), so it’s important to be extra cautious when using your credit card online or offline.
This a problem not only for consumers, but businesses can suffer devastating consequences as well. Your company may have to pay out money you don’t have, in order to cover chargebacks and false payments, making it difficult to earn your profit. So how can businesses fix this problem and continue to allow their customer base to grow while still making a profit? This guide will take you step-by-step through the process of preventing credit card fraud using ID verification.
What are the consequences of credit card fraud for businesses?
The type of credit card fraud that happens most frequently is when somebody other than the card’s owner, or someone who doesn’t have permission to use it, makes a purchase using the card information.
If this false charge is detected by either the person who owns the credit card or by their lender, then the merchant becomes responsible. This can be very frustrating for businesses because usually they are targeted without even knowing it ahead of time.
The law usually leans in the favour of victims, which is just and expected as they didn’t choose to be targeted. This is especially seen in the clause that if a card is reported stolen before any fraudulent purchases have been made, then the cardholder owes nothing.
Traditional fraud prevention techniques no longer suffice
To avoid fraudulent payments, businesses have taken a number of different approaches over the years.
Though “traditional” methods may work in prevent fraud to some degree, they often are very slow and require a lot from businesses in terms of manual checking. This can lead to longer wait times for customers looking to buy something, which could cause them not want to purchase items from that company again if it takes too long.
Clearly, this is not ideal when trying to maintain revenue.
- Requesting the CVV code (card verification value) from the back of a credit card;
- Device identification tools that help you see which computers are associated with suspected fraud;
- Matching a customer’s phone number or shipping address with previous purchases helps; to ensure accuracy and prevent duplicate orders;
- Keeping a detailed and signed proof of delivery to avoid chargeback penalties.
These additional tasks slow down the buying process and often need to be completed by someone manually, which costs time and can result in errors. Outdated methods like these are not effective for businesses that are expanding into new markets.
An Ofcom report showed that 25% of internet users have given inaccurate or false details on a website to protect their personal identity online, which means consumers are less trusting than ever. This can pose a problem for brands trying to sell products and services online.
The modern solution
Regulatory requirements like KYC (know your customer) and AML (anti-money laundering) have been put in place to help ensure that consumers feel safe when buying from a brand. By following these guidelines, brands can help create an environment of trust with potential customers, after learning what is KYC.
Online buyers’ trust is essential for growth, but businesses also need methods that don’t interfere with the customer experience. In an era when customer experience is increasingly important to business success, 86% of purchasers will pay more for better service.
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