When you think of fraud, your mind is probably filled with images of major data breaches and stolen credit cards being hijacked to make purchases. However, there is another type of criminal behavior that can be just as destructive to sellers. Thatā€™s why you as an entrepreneur should learn about merchant fraud as well as strategies to fight it.
What is merchant fraud?
Merchant fraud happens when someone poses as a seller so that they can process customersā€™ payments and ultimately steal the funds. Many thieves will actually sign up for a merchant services account to process payments made with stolen cards. It also frequently occurs when the criminal sets up a bogus shop where customers make purchases that never lead to the actual delivery of a product. In many cases, the crime is not even identified until it has run its course and the thief has vanished. The rise in the use of peer-to-peer apps to make product purchases is only making instances of merchant fraud more frequent and costly to businesses, payment processors, and card brands.
Things you can do to stamp out merchant fraud.
It is important to understand how fraud affects your business. For one thing, it makes customers wary of ecommerce in general, robbing you of vital sales. Furthermore, it affects the acquiring banks, who are left holding the financial bag to pay for the costs of any merchant fraud they have unintentionally enabled. In the end, that can mean higher transaction rates that are passed down to legitimate merchants like you.
On one hand, banks can take steps to ramp up their data analytics and monitoring to spot fraud in its initial stages when the perpetrator is signing up for an account. But what is a scrupulous seller to do? Of course, the most obvious tactic is to refuse to participate in any schemes that seem shady, such as deceptive triangulation schemes. That being said, you probably have no intention of joining in on that type of behavior.
The key is to exercise common sense and communicate with your payment processor or acquirer. If you suspect that a transaction is fishy, alert your payments technology partner right away. Also, follow all the transaction guidelines they have specified. Finally, make sure you understand the ins and outs of the agreement you have signed. In situations such as this, transparency and open dialogue can make all the difference.
Unfortunately, cybercriminals and identity thieves are constantly on the prowl, searching for ways to infiltrate, steal, sabotage, and deceive. As a legitimate merchant, you will always be vulnerable to breach and identity theft. However, maintaining best practices when it comes to security protocols, anti-fraud tactics, and open communication with your payments provider can go a long way toward protecting you, your customers, and your vendors.
