Falling victim to fraud might be easier than you'd think in today's world. With e-commerce and m-commerce on the rise, fraudulent transactions are increasing in both prevalence and severity, said Kevin Lee, trust and safety architect at Sift Science.
"We're accustomed to hearing stories about hackers targeting government sites and high-profile retailers, but these criminals no longer discriminate," he said. "Last year, fraudsters targeted all kinds of businesses and organizations. By the end of the year, businesses and consumers alike were coming to the horrifying realization that no one is safe."
According to Lee, mobile is the new frontier, with fraudsters using click spam, fake installs and fraudulent clicks. They're even tricking users with fake payment apps and online ads.
Because of the nature of these malicious acts, one click can be detrimental. The best way to handle the issue is to prevent the act and identify the threat before it's too late. Evaluate your company's risk by answering these five yes or no questions.
1. Are your chargeback rates consistently under one percent of total transactions?
Fraudulent chargeback happens when a buyer pays for a product or service, then disputes the transaction and is financially reimbursed. Often this is done unintentionally, also known as "friendly fraud," with a buyer forgetting they made a purchase or not fully reading the terms and conditions. However, many fraudsters pull this off without being caught.
Lee noted that if chargeback rates remain above one percent of total transactions for months at a time, something is likely wrong and requires immediate action.
2. Do you leverage machines and tools to review all transactions/user activity?
While you can't personally keep tabs on every one of your consumers, you can invest in machine learning technology that collects data and picks up on any strange activity.
"Every time a customer visits your site, [they leave] a trail of clues about who they are," said Lee. "This customer behavior can be analyzed and used to create various probability of fraud."
3. When a customer returns an item, do you return funds to the card on file rather than issuing a check or cash refund?
According to Lee, you should avoid writing checks or providing cash refunds to any customer. It's easy for scammers to request one type of refund, then later issue a chargeback for the same transaction. However, if you pay them back on their original card, you'll have proof of the refund, and you won't run the risk of being two-timed.
4. Do you confirm a user's claimed identity by implementing two-factor authentication?
Two-factor authentication prevents users from accessing certain accounts or making certain purchases without providing information only they would know, such as a password or an answer to a security question.
"Fake accounts using stolen credit cards will continue to be a problem," said Lee. "However, as fraud schemes get more advanced, these accounts will look more and more legit, making it harder to stop them."
By requiring additional information, companies can weed out any potential scammers.
5. Are you and your employees keeping your systems up to date?
This is a simple preventative method that must not go unnoticed. If you have a pending update, don't put it off – it's available for a reason.
Each question answered "yes" earns you a point. Count your score out of five to calculate your company's risk. The lower the score, the higher the risk. Don't fret if you didn't earn a four or five – if you implement these simple tactics, you will improve your company's security risks going forward.