Protecting your business from fraudulent payment activity

Short answer: Protect your business from payment fraud in four steps: educate yourself and your staff, use a fraud management system, partner with a verified payment processor that does not store full card numbers, is PCI DSS compliant and encrypts data, and put data protection policies in place.

Online purchases account for a significant portion of fraud losses. The Australian Competition and Consumer Commission (ACCC) estimates that Australians lost over $850 million to scams in 2020, a 34% increase on 2019. Keep reading to learn how to reduce fraudulent payments and protect your business.

Figures as reported when this article was first published.

What is online payment fraud?

In general, online fraud is when someone steals another person's confidential information, including card details, and uses it to make online transactions.

A criminal can also make a transaction and initiate a chargeback later, claiming they never received the items or that the items were faulty. Only the business suffers from this kind of fraud: it loses the products and usually pays out on top.

To protect against this "friendly fraud", use a built-in digital fraud solution that monitors transaction activity. You can also put in place a smart dispute management solution that looks at purchasing history before a chargeback is issued.

Types of payment fraud to watch for

Payment fraud ranges from large-scale identity theft to an individual making one fraudulent transaction. Businesses need to protect themselves against every type, especially as the practice is so common. In the 2020-21 financial year, 6.9% of Australians aged 15 and over experienced card fraud, and businesses have an obligation to protect their customers where they can.

How common is fraudulent payment activity?

In 2021, global losses to online payment fraud were estimated at US$20 billion. Credit card fraud appears to be on the rise, and business owners need to be aware of it. During the pandemic, many businesses moved online quickly without putting the proper security measures in place.

Hackers saw an opportunity, and card-not-present fraud began to increase. It became much easier to take confidential information without ever crossing paths with the actual cardholder. Card-not-present fraud is perhaps the most common type of online payment fraud right now.

Fraud is an enormous market, which is why every business should take steps to reduce the risk. Companies have a responsibility to their customers, as well as to prevent losses for themselves.

Which businesses are susceptible to payment fraud?

All organisations are susceptible to fraudulent payments. The AFP found that 82% of businesses experienced suspicious payment activity in 2018. Larger companies were the most vulnerable, but small businesses were also at risk, and payment issues can hit small companies much harder.

It is not only consumer-focused companies, either. B2B companies experience high rates of fraud too: 98% of B2B companies in one study reported fraud attacks in 2021.

In short, every business owner should have anti-fraud measures in place.

How to protect your business: four steps

There are plenty of ways to safeguard a company from online fraud. These four simple steps help keep your payments protected.

1. Educate yourself and your staffUnderstand how fraud happens and make sure your team does too.
2. Use a fraud management systemMonitor every transaction for suspicious activity in real time.
3. Partner with a verified payment processorChoose one that protects card data and integrates with your accounts.
4. Implement data protection policiesSet out how you protect customer data and what happens if there is a breach.

1. Educate yourself and your staff

Start by doing plenty of research. Make sure you understand all the ways fraud can take place and what you can do to reduce the risk, and make sure all staff understand the risks of fraud and what they can do to prevent it.

Educating staff includes telling them about all data protection policies, the types of scams taking place, and the legal requirements around protecting confidential data.

2. Use a fraud management system

An enterprise fraud management (EFM) system tracks transactions and looks for suspicious payment activity. Plenty of systems can monitor all your transactions, and they are often better at catching a potentially fraudulent payment than the human eye. Your staff should be aware of fraud, but an anti-fraud detection system is perhaps even more important.

Choose a fraud management system that suits your business. It should:

• Fit your budget.
• Integrate with your other platforms, so your accounts stay linked.
• Provide real-time analysis.

3. Partner with a verified payment processor

Partner with a verified payment processor, such as B2Bpay, that protects customer data by:

• Not storing full card numbers.
• Complying with the PCI Data Security Standard (PCI DSS).
• Encrypting information.

Many payment processors can also detect suspicious payments as card details are entered, redirecting people to pay through their mobile banking or checking the details against data held by their bank.

A payment processor should also integrate fully with your other business accounts and plug seamlessly into your website.

4. Implement data protection policies

Data protection is particularly important for e-commerce businesses. Have a policy that sets out everything you will do to protect consumer data, from firewalls and encryption to your plan in case of a data breach.

Customers should feel secure buying from you, which means everything from their shipping address to their banking information is protected. This protects your organisation if something goes wrong, and it also helps business, because customers feel safer entering their details and buying from you.

Final thoughts: how B2Bpay can help

Businesses of all sizes should protect the payments they make and take. Partnering with a payment protection service is one simple step to make sure everything runs smoothly.

B2Bpay offers all the security measures outlined above, along with seamless integration with the accounts linked to your business, including Xero and MYOB.

Learn more about how B2Bpay can help your business:

• Making payments with B2Bpay
• Receiving payments with B2Bpay
• B2Bpay security measures