Safeguarding Your Card Program: The Importance of Fraud Protection When Choosing Your Payment Provider

Selecting a payment provider that prioritizes your protection against card fraud not only ensures a reduction in financial loss but also fosters confidence and trust with your cardholders. Based on recent research, it is predicted that the cumulative losses to online payment fraud globally between now and 2027 will exceed $343 billion. 

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At Qolo, the security of your card program is our top priority. Here we explore some of the most commonly used fraudster tactics, as well as fraud prevention capabilities you should demand from your payment provider.

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Fraudulently Acquiring Card Data:

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• Card Skimming & Shimming: This involves the illegal capture of card data from the magnetic strip or microchip on a credit or debit card. These devices are typically concealed within legitimate card readers, often found in ATMs or gas station pumps.
• Data Breaches: Fraudsters target businesses or online merchants by exploiting cybersecurity vulnerabilities within their systems to illegally obtain card data.
• Social Engineering: Fraudsters utilize social engineering techniques to manipulate individuals or customer service representatives into providing virtual card details, often by posing as a trusted entity such as a bank representative.

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Card Transaction Fraud:

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• Card Cloning: Cards cloned through card skimming are often used to produce counterfeit credit or debit cards, known as clones, for conducting fraudulent purchases or cash withdrawals.
• Card Not Present (CNP) Fraud: Occurs when fraudsters use stolen credit card information to make purchases online or over the phone, exploiting vulnerabilities in online payment systems.
• Enumeration Attacks (BIN Attacks): Cybercriminals exploit payment processing system vulnerabilities by generating numerous card numbers using valid BINs and testing them on merchant websites or payment gateways to find valid ones for fraudulent transactions.

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How Payment Partners Address Fraud:

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Now that we have explored some of the most common card fraud tactics, let's delve into some key capabilities utilized by your payment provider to tackle fraud head-on. While not exhaustive, it is key that your payment provider implements some, if not all, of these capabilities:

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• 3D Secure (3DS): Adds an extra layer of protection to online purchasing by requiring additional authentication steps for card transactions.
• Card and Authorization Controls: Includes various controls and limits such as spending limits, transaction limits, merchant category controls, geographic controls, alerts and notifications.
• Fraud Services (Rules): Payment providers develop fraud capabilities that leverage Network data to make informed decisions during transactions.
• Transaction Monitoring: Real-time monitoring of transactions helps detect unusual activities such as large purchases, transactions from different geographic locations, or multiple transactions in a short period, indicating potential fraudulent behavior.
• Fraud Detection Algorithms: Utilize sophisticated algorithms to monitor transactions in real-time and identify potentially fraudulent activities based on parameters such as transaction amount, location, frequency, and spending patterns.

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As fraud continues to pose a threat to businesses, selecting the right payment partner is crucial. Qolo offers advanced fraud protection with 3DS authentication, fraud detection algorithms, and real-time transaction monitoring. Safeguard your business and customers—contact us today.

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Reference: https://b2b.mastercard.com/news-and-insights/blog/ecommerce-fraud-trends-and-statistics-merchants-need-to-know-in-2024/