When we hear the word “fraud,” we often think of our own personal experiences with having a credit card number stolen and the frustration of seeing an unknown charge on our bank statement – especially a pricey one. But if you’re a business owner, you may also be familiar with the added headaches of customer service fiascos, requests for refunds, chargebacks, and more that cost you your time, money and patience.
There are some bad actors out there who thrive off being able to steal others’ sensitive information and data and use it for all sorts of malicious reasons: Buying product with the intent to resell, taking advantage of a free trial or discount only offered to a new customer, etc. Regardless of the reason, it’s important for businesses to be aware of the different ways these attackers may act.
Types of Fraud
Payment fraud: Probably the most commonly known and most frequently heard about, payment fraud occurs when a stolen credit card is used to purchase goods or a service. Businesses operating with card-not-present policies are extremely susceptible to this since the physical card is not being swiped at any time during the transaction.
Friendly fraud: A purchase is made, and then the customer disputes the charge with their bank and a chargeback is initiated. In some cases it could be a mistake, and the customer didn’t recognize the way the charge appeared in their statements. But in many cases it will be done intentionally so the customer is able to receive a refund while keeping the goods.
Refund fraud: Similar to friendly frauds, businesses who ship physical goods that have been purchased online may deal with fraudsters who exploit shipping and logistics processes. They may contact customer service claiming that they never received the product, it was lost in transit or damaged – anything that could better their case for getting a refund, while they are able to keep the actual goods that did arrive.
Account takeover (ATO) or new account opening (NAO) fraud: With these types of frauds, it’s your customer database at risk. This could include credit card numbers that can then be used for fraudulent purchases. You may have also heard about the increase in data breaches where non-financial information like usernames, passwords and emails have been stolen and are being sold online. This information is so highly desired because it enables these attackers to create new fraudulent accounts and start making purchases. Offerings like loyalty programs or discounts can be taken advantage of or in some cases, existing funds drained. Businesses offering subscription service models are also at risk of NAOs in particular because they often consist of free trials or other perks upon opening a new account.
Triangulation and interception fraud: In these cases, attackers may set up a fake store that appears to be legitimate – solely for the purpose of stealing credit card data. They are able to hook their customers oftentimes by listing their products at a cheaper price as the legitimate counterpart. But there are some who won’t even bother with a fake website and will simply try to intercept the customer’s order at the legitimate store, change the shipping address, and receive the products themselves. At that point, they’ve got the credit card details and the customer will likely request a refund, not realizing their information has been stolen, and ultimately this costs the business money.
Being aware of the types of fraud out there can help you safeguard your business, and find solutions that will enable you to monitor activity and help identify fraudulent activity before it costs you.
