Virtual credit card


6th May, 2021

Payments: Risk of credit card fraud remains

Fraud comes in many forms. For today’s business owners, understanding each of them and how to reduce your risks, is an absolute must, writes Kellie Byrnes.

Credit card transactions are a business staple. They were already popular before the global pandemic hit, but with cashless payments considered a safer choice, they’re now even more crucial.

According to global research from 2017, the percentage of people aged 15-plus in Australia and New Zealand who possess a credit card is approximately 60 (59.69 percent in Australia and 60.87 in New Zealand).

The Australian Payments Network reported that overall spending on Australian credit cards reached a new record high in 2019.

According to the organisation’s Australian Payment Fraud 2020 report, spending on cards grew by 3.9 percent, reaching over $819 billion in total.

With such high numbers, it’s no wonder most business owners offer credit card payments to buyers.

Unfortunately, though, there’s a significant potential downside to credit card acceptance: fraud.

Fraud by the numbers

Although fraud has been dropping as companies become more proactive about reducing risks, there’s still plenty to be concerned about.

The Payment Fraud report noted that fraud on Aussie payment cards dropped by double digits for the first time in 2019, falling by 19.5 percent.

Online card fraud, skimming/counterfeit fraud, and fraud on lost or stolen cards also fell in 2019.

Yet, this still amounted, all up, to $464 million worth of fraud.
What’s also concerning is that scams are on the rise.

Many owners and managers think that since instances of credit card fraud make up only a minimal percentage of all card transactions, it’s not worth worrying about.

However, the negative impacts can be huge, especially for small businesses.

Businesses are liable for chargebacks, after all. (The forced transaction reversals cardholders’ banks initiate as a consumer protection mechanism against fraud.)

So, if you accept a fraudulent transaction, you may end up not only shipping goods or providing services to those who ordered them but also having to refund the payments you received.

As a result, be vigilant about protecting your business and spot potential credit card fraud ASAP.

If you run an online venture, this can be trickier since transactions aren’t done face-to-face.

Types of scams

There are many ways you can prevent credit card fraud occurring in your business, but first you’ll need to start by getting to know some of the most common types.

Card-not-present (CNP) fraud

These fraudulent transactions occur when a cardholder does not present a card to the merchant in person.

While all internet, phone, and mail-order transactions have to happen without a card physically present, fraudulent payments result when people steal card information (not necessarily the card itself) and use those financial details to buy goods or services.

Often, hackers and other criminals test a heap of stolen credit card details online on ecommerce stores to see which are valid.

Once they determine this, they use the card numbers to make larger and more frequent purchases.

According to the abovementioned Australian Payment Fraud report, CNP fraud accounts for 87 percent of all card fraud in Australia.

This statistic reflects the growth of cybercrime and identity theft and the increasing move towards online transactions.

Lost or stolen credit card fraud

Sometimes, criminals use someone else’s lost or stolen physical credit card before card owners have a chance to report the missing card to their financial provider.

This enables thieves to get away with unauthorised transactions.

Chargeback fraud or “friendly” fraud

Shoppers may claim that a charge wasn’t made by them when it was, in fact, a legitimate transaction. They might commit fraud intentionally, or they might not recognise the charge on their statement and so dispute the transaction due to a mistake.

The latter tends to occur more when multiple account holders use one card, such as when children buy things on a parent’s credit card.

Counterfeit card fraud

This kind of fraud happens when someone creates a fake physical card using another person’s card details.

This illegal activity usually comes from fraudsters skimming real cards through magnetic swipe devices.

Payment scams

It’s also important to understand that credit card payment scams can arise when true account holders get tricked into authorising payments from their accounts.

In this case, people think a card payment is being made to a legitimate person or company.

At other times, scammers manage to have a payment go ahead because they impersonate the account holder and scam the merchant they’re dealing with into putting the transaction through.

The bottom line here is, if you’re making transactions then you need to make certain you’ve minimised the risk of fraud at every opportunity. Your future success depends on it.

Do you want to ensure your payments are secure? Find out more about how MYOB software works to keep your money safe here.