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How can small businesses improve their payment fraud prevention?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20232 min read

There’s no way to take payments online that’s entirely risk-free, making fraud an unfortunate reality of doing business. For this reason, payment fraud prevention strategies should be a non-negotiable component of any payment platform you use. Find out how to prevent payment fraud and protect your bottom line in our guide below.

What is payment fraud?

Payment fraud refers to any scam or criminal activity at the point of payment. It might involve using counterfeit credit cards to make a purchase, logging into bank accounts with stolen ID numbers, or using phishing techniques to gather and store sensitive cardholder information. Ecommerce fraud typically involves card-not-present transactions, including orders placed online, over the phone, or through the mail. Because it’s at a distance, it can be more difficult to detect than cards presented in person.

Why is payment fraud prevention important?

It’s essential to implement payment fraud prevention techniques. When transactions go through with stolen card details, this results in costly chargebacks as well as a hit to your brand reputation. Furthermore, if your website doesn’t seem reliable it can lead to lost sales. Customers will abandon their shopping carts and fail to complete a purchase if they feel like your checkout page isn’t secure enough. This might include a lack of a visible SSL certificate, lengthy payment forms asking for irrelevant information, or too many third-party redirections.

Payment fraud prevention techniques

Fortunately, making your payments process more secure doesn’t need to be difficult. Here are a few easy payment fraud prevention techniques to try.

Be aware of unusual purchasing behaviour: Your payment processor should automatically flag unusual transactions including large numbers of big-ticket items or a series of small purchases used to test a stolen card number.
Follow all PCI DSS regulations: If you take online card payments, you’re required to follow the Payment Card Industry Data Security Standard (PCI DSS) regulations. These clearly outline how to store and transmit cardholder details in the safest manner. If you use an outside payment gateway, they’ll do this on your behalf.
Keep on top of all system updates: Be sure to keep your payment platforms secure with the latest anti-malware protection and regular system updates. This makes sure you’re protected against the most current scams.
Use multi-factor authentication: If you use cloud-based systems, be sure to implement strong passwords as well as multi-factor authentication. This means your staff will need to use facial recognition, fingerprint readers, or single-use passcodes in addition to passwords to get into your business accounts.
Validate cards with CVV/AVS checks: This adds an extra layer of security to card transactions by requesting the customer’s address and three-digit CVV code as well as their 16-digit card number.

How to prevent payment fraud: the bottom line

Fraud is damaging to any company’s reputation, but it can be absolutely devastating for small businesses. To retain customer trust, you’ll need to put the latest fraud protection strategies in place. This starts with a secure website and ends with a secure payment processor. Make sure that any card payments are taken using a PCI compliant solution that follows the correct protocol according to your business size and number of transactions.

Using a trusted payments provider takes away much of the guesswork of secure payment services. Service providers like GoCardless handle all the security issues involved with online payment processing on your behalf. When customers go to make a payment, they provide sensitive details over the provider’s site rather than your own. GoCardless’s Verified Mandates feature authorises new customers in real-time using the power of open banking to prevent fraud. Although this isn’t yet available in Australia, it’s currently offered in the US and UK. With a combination of the latest technology and secure payment solutions, you’ll keep your customers protected from fraud.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.