For businesses across the country, fraud is a very serious problem. According to the Association of Certified Fraud Examiners, U.S. businesses typically lose around 5% of their annual revenues to fraud, while in 2018, worldwide credit card fraud losses reached a staggering $24.26 billion. Implementing advanced fraud solutions could help you protect your customers – and your bottom line – from the damaging effects of fraudulent behavior.
What types of fraud can affect businesses?
Fraud occurs when an individual or a company uses deceptive, misleading, or unfair methods to make a gain (or cause a loss). There are many different types of fraud, all of which can have a serious impact on your business’s financial health:
Customer fraud – Customers can defraud businesses by writing bad checks, shoplifting, using bad credit cards, or returning items they didn’t purchase to gain a refund.
Employee fraud – Employees or other insiders can defraud a business by stealing assets, writing fake checks, or skimming cash. This type of fraud may also involve collusion and extortion.
Invoice fraud – Suppliers may defraud a business by submitting fake or inflated invoices for services, while fraudsters can impersonate legitimate suppliers with the goal of changing their account details and diverting future payments.
Corporate identity fraud – Fraudsters can impersonate legitimate businesses and steal their corporate information for financial gain. In some cases, fraudsters may change a company’s details with government agencies.
6 fraud prevention tips for businesses
Fraud can take many different forms, and organizations of all sizes – from global conglomerates to SMEs – can be affected. And it’s not only the financial health of your business that you need to worry about. Fraud can also damage your brand image and reputation, which could have long-term effects on your company’s profitability. As a result, it’s a good idea to take proactive steps to deal with credit card fraud, bank fraud, and other types of fraud perpetrated on businesses. Here are some of the most advanced fraud solutions you can use to keep your business protected.
Review all orders before authorizing payments – Checking that you’re receiving orders from legitimate vendors is one of the simplest e-commerce fraud prevention methods, but it’s also one of the best ways to detect invoice fraud. Review all invoices before you authorize payment to make sure that they’re from genuine suppliers, inform suppliers after a payment has been made, and ensure that you institute a rigorous verification process for large payments.
Train your employees in credit card fraud detection – Teach your employees how to prevent credit card fraud by following basic, standardized processes. Ensure they request the card’s CVV for any virtual terminal payments, ask for phone numbers and shipping addresses (and check that they match any information the cardholder has previously given), and use device identification tools to spot computers that may be associated with fraud.
Follow PCI DSS standards – Wondering how to prevent credit card fraud? Implementing PCI DSS requirements (a set of general practices intended to ensure that you store, handle, and transmit your cardholder’s information safely) can keep your customers’ data secure and ensure that your business isn’t at risk of credit card fraud following a data breach.
Make use of data analytics – Machine learning and adaptive behavioral analytics can transform your business’s approach to e-commerce fraud prevention. These types of technologies can analyze data – such as how quickly a user moves around a website or how fast a user spends money – and use it to determine whether they are engaging in fraudulent activities. While this type of fraud prevention technique may be out of reach for smaller companies, it can be highly effective.
Destroy sensitive company information – To deal with corporate identity fraud, ensure that you destroy all confidential business information when it’s no longer needed. This includes permanently deleting data from old computers and other electronic devices and shredding all non-essential paper documents. You should also regularly check your company’s official registered details to ensure that they’re correct and haven’t been altered by a third-party.
Switch to an ACH Debit payment system – ACH Debit is one of the safest payment methods in the U.S., with payments being protected by both Nacha (the governing body of the ACH network) and Regulation E. In 2019, credit card fraud was reportedly the most common form of identity theft, with almost 160,000 reports, a figure which almost tripled between 2014 and 2018. To ensure that your business is protected from fraud, opting for ACH Debit could be the right move.