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Accounting for fraud is always stressful for any business, and rightfully so. The prospect of a potential customer intentionally misleading you can stir distrust between yourself and your clients. This stress is only heightened by the negative effects that fraud can leave on your business. Between demands to return money you were never given, incurring fees due on ongoing chargebacks, or even fully losing access to your merchant account, the effects of potential fraud on your business are nothing less than detrimental.

The best way to efficiently combat these potential issues is to define fraud in its various forms and identify which is most likely to affect your business, so you can effectively defend yourself.  The following are some of the most common types of fraud you’ll run into…

Friendly Fraud

This category of fraud is the least sophisticated of the forms listed and is often committed by a sole individual, either accidentally or on purpose. Classified as Friendly Fraud, it occurs when a cardholder disputes an authentic charge on their account. Because they either don’t recognize the charge or are misleading their bank intentionally to get the money back. This fraud can be incredibly difficult to identify, and even harder to combat effectively. Most fraudsters go directly to their bank to submit a chargeback like this, so by the time you understand the situation, the money is already sent back, and the process becomes even more difficult.

However, due to the rise in Friendly Fraud over these past few years, credit card companies have begun to recognize the problem, and are now offering zero-liability protections for any business at risk. Meaning your business will not be held responsible for any potential friendly fraud under most circumstances.

Merchant Error

Most fraud derives from external sources, but the most common type of fraud can actually propagate from errors inside your business. Typically originating from your merchant services provider, and any oversights in their management of your customer’s data. These oversights may include, incorrect pricing resulting in an overcharge, unauthorized recurring payments running on a customer’s card, or any mishap that could happen because someone recorded incorrect data.

Criminal Fraud

The classic and most intimidating form, committing Criminal Fraud has only gotten easier as more and more essential parts of life become digital. Impersonating someone is even simpler to do online, especially if you’re just making small purchases using their stolen information. You don’t even need to physically steal a card from somebody these days, through hacking or surfing the dark web, any fraudster can find the information they’re looking for. And online identity authorization is so insubstantial, that whether they physically have stolen the card, or just have the data stored on a counterfeit card, they can easily utilize it in most online settings.

Preventing Potential Fraud

Every business will always be somewhat susceptible to fraud, no matter how many layers of encryption are integrated, implementing state-of-the-art data security is not a one-size-fits-all all solution to every fraud case. Whether it’s Merchant Error, Friendly or Criminal Fraud, a different set of procedures for each form is needed to efficiently protect yourself. You can’t brag about your high-tech firewall when a customer is struggling to locate their delivery; you need a detailed outline of relevant data on their item so you can identify whether the case is either merchant error or friendly fraud. The following are other examples of prevention methods for fraud in its various forms…

  • Documented accounts of the price and condition of the product or service you sell. This will protect you from accusations of misleading advertising, therefore preventing any fraudster from winning a chargeback dispute on those specific grounds.
  • Documented sales details on all purchases, preventing fraudsters from lying about buying an item.
  • List identifiable merchant descriptor on your bills, to prevent any accidental cases of friendly fraud.

To effectively protect your business, it’s crucial that you assemble a robust set of fraud prevention procedures. But if you’re struggling to build this on your own, feel free to contact us at Revitpay. Were a Payment Processing Solutions company, equipped with state-of-the-art fraud prevention tools to assist any business at any level.

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