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Merchants Called To the Offensive In Battle Against Cyber Fraud

Posted: May 20, 2021 | Updated:

Cyber Fraud has been a concern that merchants have been dealing with for a while. But the increasing use of online payments during the global pandemic has forced merchants to take it a little more seriously. The risk of fraud has never been greater than it is now.

People are engaging in fraudulent activities while online more than ever. Friendly fraud is a concern, as people are requesting chargebacks on many transactions after they collect their items. While customers are running off with various things, online retailers are losing money from chargebacks. 

Traditional forms of cyber fraud are still prominent. These include the use of malware, remote access Trojans, and other things that can target a merchant’s system. It becomes easy for thieves to steal data and compromise a website with these tools. A business will lose money on chargebacks if this happens. These chargebacks can be worth significant amounts of money, as data thieves often make expensive purchases through the identities they steal.

Online merchants are more susceptible to fraud than ever, but it doesn’t have to be this way. These retailers are working harder than ever to control cyber fraud. They are using many efforts to reduce the risk of fraud and to keep their investments under control. All of these moves are about going on the offensive and working harder towards identifying fraud.

Confirming the Customer’s Identity

Many cases of cyber fraud can occur when a person tries passing oneself off as another person. Online identity theft is a concern, as anyone could log into an account and claim to be that person. The customer will quickly engage in fraud after stealing that identity.

Merchants are fighting this form of fraud by using further measures to confirm each customer’s identity. The business can confirm details like one’s billing and mailing address, credit card data, and other factors.

The customer’s IP address will also be a factor. The IP address of the connection one uses when purchasing something would have to link up to the billing or mailing address one uses, for example.

Customers can also monitor other things surrounding a person’s identity, like one’s phone number or email address. A phone number might be listed in an area outside one’s area or have a billing address outside where one lives. The email address might also look fake or be registered in a different spot.

Other sudden changes like a higher frequency of orders or a significant increase in one’s order amount versus prior purchases could also be points of review. Merchants can check these things to flag possible fraudulent activities that might result in chargebacks.

Managing Internal Data

Internal data can also help identify cases of fraud. The business can monitor all the activities the customer enters. The team can monitor when that person logs into an account, what products someone purchases, unique promo codes one uses, and other activities. A merchant can compare internal data with everything else a customer is doing to confirm a transaction or to directly question whatever someone is doing while online.

The work is about finding unique changes in one’s behaviors. Anything that is out of the ordinary will be flagged. The goal is to prevent the customer from completing the transaction before anything can go forward.

Finding Fraud Through Behavioral Analysis

Artificial intelligence will play a critical role in preventing cyber fraud in the future. Behavioral biometrics technology is one part of the work. This system is a solution where a customer’s behavior is monitored in real-time. The customer’s interactions with online apps and devices are measured to identify how they act and if they show signs of possible fraud. The AI system will review these details and determine if the user is real or if that person is trying to commit fraud.

The behavioral biometrics system can also identify when a user is a remote access Trojan, a malware program, or a non-human entity. The effort can catch parties that might commit fraud. The work does not entail going through specific private details, but rather about confirming the person is accessing a site from a place where one might appear.

Positive Profiling Also Works

Another solution for preventing cyber fraud entails positive profiling. The practice involves using Big Data to review a person’s behavior through various retailers and websites. The customer’s behavior is compared with actions from other confirmed fraud suspects. The customer is screened instead of the transaction, providing a more accurate response to the issue.

Positive profiling is not about trying to uncover private data on a customer. It is about monitoring the customer’s shopping activities. It confirms that the customer is acting like any other shopper and that nothing is out of the ordinary.

A Chronological Analysis

The last point merchants are using to stop cyber fraud entails using a chronological review of everything happening in a chargeback. This part of stopping cyber fraud entails what happens after the transaction, but it can potentially prevent friendly fraud cases.

A time-based review can analyze the customer’s identity, prior purchase or shopping behaviors, and other details surrounding a transaction. The retailer can review how the deal is different or similar to others. The work is about showing that a person might have made a proper transaction and is trying to cheat one’s way out of paying for it. But it could also confirm that a legitimate chargeback is necessary. Whatever the case, it can still reduce the general risk of excess chargebacks in the process.

Will Everything Work?

People are going to keep on attempting cyber fraud no matter what happens. Some people will want a free ride on things, while others might be desperate and willing to do what it takes to avoid spending money on items. Whatever the case, online retailers are more proactive in reviewing possible cyber fraud cases. Their work is about preventing fraud and protecting their investments. With fraud being on the rise, these businesses will need to be more adamant when fighting fraud.

Frequently Asked Questions

  1. Why are merchants being called to the offensive in the battle against cyber fraud?

    Merchants are being called to the offensive in the battle against cyber fraud due to the increasing prevalence and sophistication of fraudulent activities targeting businesses. Cybercriminals constantly evolve their tactics, posing significant threats to merchant operations, customer data, and financial security. By taking an offensive stance, merchants can proactively implement robust security measures, such as multi-factor authentication, encryption, and fraud detection systems, to protect their businesses and customers. Being proactive allows merchants to stay ahead of cyber threats, minimize potential losses, maintain customer trust, and preserve their reputation.

  2. What are the consequences of cyber fraud for merchants?

    Cyber fraud can have severe consequences for merchants. Firstly, financial losses can be substantial, as fraudsters can exploit vulnerabilities in payment systems, leading to unauthorized transactions, chargebacks, and financial damages. Additionally, the reputational damage resulting from cyber fraud incidents can erode customer trust, leading to loss of business and negative brand perception. Merchants may also face legal and regulatory repercussions if they fail to adequately protect customer data and comply with industry standards. Moreover, the time and resources required to investigate and mitigate cyber fraud incidents can be significant, impacting operational efficiency and diverting focus from core business activities.

  3. What proactive measures can merchants take to combat cyber fraud?

    Merchants can take several proactive measures to combat cyber fraud. Firstly, implementing strong authentication protocols, such as multi-factor authentication, helps verify the identity of customers and reduces the risk of unauthorized access. Secondly, encrypting sensitive data, both in transit and at rest, ensures that it remains secure and inaccessible to unauthorized individuals. Thirdly, deploying robust fraud detection and prevention systems, leveraging advanced algorithms and machine learning can help identify suspicious patterns and behaviors, allowing merchants to take action promptly. Additionally, regularly updating security software, training employees on cybersecurity best practices, and conducting vulnerability assessments are crucial steps in maintaining a secure environment.

  4. How can merchants collaborate to combat cyber fraud?

    Merchants can collaborate to combat cyber fraud by sharing information, best practices, and threat intelligence within their industry or business networks. Collaborative efforts can include participating in industry-specific working groups, sharing anonymized fraud data, and collaborating with payment processors and financial institutions to identify and respond to emerging threats. By pooling resources and knowledge, merchants can collectively strengthen their defenses, raise awareness about cyber fraud risks, and work towards developing industry-wide standards and guidelines. Collaborative initiatives also enable merchants to leverage shared experiences and insights, staying ahead of evolving fraud techniques and enhancing the overall security posture of the merchant community.

  5. What role do payment processors play in combating cyber fraud?

    Payment processors play a crucial role in combating cyber fraud. They act as intermediaries between merchants and financial institutions, facilitating secure and reliable payment transactions. Payment processors employ advanced fraud detection and prevention technologies to monitor transactions for suspicious activities, enabling them to flag and block potentially fraudulent transactions. They also invest in robust security infrastructure, such as encryption and tokenization, to protect sensitive payment data. Additionally, payment processors often collaborate with merchants to share fraud data, provide education and training on fraud prevention, and offer support in investigating and resolving fraudulent incidents, collectively strengthening the defense against cyber fraud.

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