Understanding Online Card Fraud and How To Safeguard Your Business From It

Understanding Online Card Fraud and How To Safeguard Your Business From It

On 9 August 2019

Card fraud is described as the theft of funds, products or services involving the use of credit or debit cards.

Business owners who sell or transact online usually bear the brunt of card fraud particularly because when its a ‘card-not-present’(CNP) transaction, it’s much harder to verify the identity of the person using the card.

While only a small percentage of card transactions are fraudulent, they can cost millions in losses for business owners and card owners. The most common types of fraud include:

Card Theft Scams:

This occurs when professional fraudsters steal cards or card information and try to use it to buy products. They will then either consume the product or try to re-sell the items to unsuspecting buyers. They may also claim to have cancelled a service e.g a holiday booking and ask for a refund for the amount paid by the genuine card holder. 

Friendly Fraud

This occurs where a client makes a payment to a business and them consumes the product or service. Once this is done, they then issue a charge-back claiming not to have received the product or service or claim that their card was used fraudulently. While this mostly occurs online, there are instances where card holders will try and initiate charge-backs for card present transactions.

So as a business, how do you safe-guard your business against card fraud? 

While you can’t eliminate fraud in its entirety, there are a few things you can do to reduce its occurrence. 

They include:

  1. Looking out for suspicious email addresses - If the email customers uses contains too many characters or mismatched letters e.g ask for the customer to send verification details. This is easier to do for smaller e-commerce sites where the orders can be manually checked.
  2. Require a Security Code for all Cards - Most online card payment processes require consumers to input the CVV number. Depending on your payments provider, the consumer may also be asked to provide a One Time Password - OTP
  3. Assign tracking numbers to orders and require signatures at delivery - This ensures you can track the transaction from when it was initiated to when the customer acknowledges receipt of the item. 
  4. When in doubt, ask for verification - Trust your gut. If you are suspicious, ask for the customer to provide proof of identification as well as well as a photo of the card showing the last 4 digits only. 

Hotels and tour operators are often affected by online card fraud. To reduce the risk of fraud they can:

  1. Ensure that clients are aware of their terms and conditions before payment has been done e.g cancellation charges and no-show fees
  2. Confirm that the person who’s booked is the one who checks in by asking for identification documents (ID, Driver’s Licence or Passport)
  3. Ensure that the client signs a check in form and that details match the IDs provided
  4. For tour Operators, ensure you maintain photographic and video evidence of clients enjoying the services paid for
  5. Have open and flexible terms and conditions that make it easier to resolve complaints without the client feeling the need to issue chargebacks or dispute the transaction
  6. Have a complaint resolution mechanism that documents complaints and how they were dealt with

How Pesapal Safeguards Against Fraud

At Pesapal we go the extra mile to protect your business from fraudulent card activity. We sort PCI DSS certification meaning we employ world class measures to safeguard your money. 

We also:

  1. Have a state of the art fraud management system that is able to block suspicious transactions
  2. Manually check transactions by our experienced staff
  3. Risk profile our merchants to ensure that they do not suffer added fraud attacks.
  4. Inform merchants when a transaction is suspicious so they can ask for verification


Pesapal for Businesses: Understanding Fraud

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Published In: How To's,Payments

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