How to Prevent Credit Card Fraud for Your Merchant Account?

April 10, 2021

One of the things that credit card fraud targets are merchant accounts. It can be very easy for credit card fraudsters to leave business owners’ financial transactions vulnerable to fraudulent activities. 

This situation can lead to serious financial consequences. In this article, we will explain how to prevent credit card fraud for your merchant account.

Simply put, e-commerce fraud is when someone orders a product or something similar, they use a fake or stolen credit card. There are many types of online fraud. But we have shown the four most common ones below.

Account Hijacking and Identity Theft on Merchant Accounts

Account hijacking and identity theft on merchant accounts occur when fraudsters use tools to gain control of the user’s credentials, such as stolen identities, bot attacks, phishing, malware, and the like, to gain their own hands on the account of an online selling website.

1. First party abuse
2. Card testing fraud
3. Third-party scam

Some situations need to be done in cases such as account hijacking and identity theft in merchant accounts, and it will be useful to take your precautions by paying attention to the details in our article on how to prevent credit card fraud for your merchant account.

1. First party abuse

This type of fraud, which is also known as improper use/utilization fraud, often does not have a bad purpose but causes a financial impact on traders. It happens when the owner of the card or a young family member makes an online purchase.

Over time, the cardholder forgets the purchase or does not know the purchase made by the family member without his knowledge and informs his card’s bank that it has encountered fraud.

2. Card Testing Fraud

Card testing scams, one of the most common forms of credit card fraud, usually start by checking whether those stolen accounts are still valid after learning the account numbers of stolen credit cards by people of bad intent.

They do not know what the associated credit limits are for the stolen account. In this, they send scripts that shop online. Before these small purchases are detected, they make a few large purchases that push the credit card limit.

3. Third-Party Fraud

This method is one of the most common scams in the online shopping environment. It happens when someone with a bad purpose learns about the payment methods of the credit card they’ve acquired and uses it by purchasing e-commerce sites. 

As the cardholder, you can control the transactions on your account and report any transaction without your knowledge. You can significantly protect your account from fraudulent incidents like this if you know how to prevent it properly.

For example, someone who uses advanced artificial intelligence techniques on websites and has extensive knowledge on this subject can look at the details of online purchases on the website and have enough information to understand whether the payment made is real or fraudulent.

The Negative Impacts of Credit Card Fraud

Your organization is not only affected in terms of revenue loss in online trade scams and credit card fraud. Apart from that, your organization loses reputation and you may find yourself losing customer trust.

Each of these negative impacts (financial losses, damage to company reputation, and loss of customer trust) threaten the future state of your organization. The risk that occurs as a result of this e-commerce scam doesn’t matter no matter how big your company is.

Signs That Your Organization is at Risk of Online Fraud

Disrupting certain practices you need to do on your e-commerce site can make your company even more vulnerable to e-commerce fraud.

For example, e-commerce companies should examine the source of the traffic generated on their websites, follow the reflections in sales and wages in detail, closely monitor the fraudulent activities complained by customers, and identify the differences in the continuous purchases made by existing customers.

Without critical monitoring by companies, the likelihood that institutions and their customers will be targeted by credit card fraudsters begins to increase. Apart from these, companies should be aware of any existing scams, and as their company grows, they should find business partners with whom they can develop strategies that specifically address all threats they may encounter.

We have explained in detail how to prevent credit card fraud for your merchant account with what we have explained so far. Now you know how important it is for your e-commerce company to take these precautions.

Your Role in Preventing E-commerce Fraud

Everyone working in your company is responsible for how to prevent credit card fraud for the merchant account. All company employees should be aware of this.

The company should regularly check whether a change your employees make to provide a better quality experience to your customers makes it easier for e-commerce fraudsters to do their job. One of the most common examples of this is the transition from the online purchasing model to the in-store pickup model.

Security updates for your company’s website and applications are made available to your organization to prevent the acquisition of credentials in a way that may cause fraud to hijack users’ accounts.

These updates should be downloaded and installed as soon as they are made available to you. To make sure that your institution is always safe, you need to activate this feature on all devices that use your website.

Apart from these, you should inform your company employees to be very cautious about customer complaints and the importance of carefully monitoring clear signs of possible e-commerce fraud.