The COVID-19 pandemic has led to the surge in the use of digital technologies due to imposed lockdowns and quarantines. It has prompted people to rely on mobile applications, online channels, and cashless payment methods. Accordingly, media consumption spiked as the coronavirus outbreak pushed people to seek information and entertainment at home.
This new landscape for advertisers in developed and emerging markets and media companies allowed them to leverage enhanced engagement. Also, many businesses had to take advantage of such changes to create space for new business models in providing consumers with more convenient and seamless service.
However, recent developments have heightened the threat of cybersecurity risks, particularly fraud targeting businesses. In 2020, the study conducted by Javelin Strategy & Research revealed that there had been a 35% increase in fraud attempts worldwide. In addition to that, the study also impartedthat criminals are becoming more active at leveraging various fraud strategies to penetrate digital channels, which is very alarming since bac actors are employing sophisticated tactics to commit fraudulent activities.
Friendly fraud is among the rising threats to online businesses today, and this happens when the cardholder reports and disputes a credit card charge by mistake or with ill intent.In other words, this kind of fraud occurs when the cardholders abuse the credit card chargeback system.
The chargeback system is designed to work as a consumer’s safeguard against credit card fraud. It gives users the power to dispute if they feel unfair and invalid charges. Chargebacks are only filed for legitimate reasons like undelivered service, item or service are counterfeit, the merchant did not cancel a recurring payment when requested, and the original transaction was not authorized.
Once the bank has investigated the claim and found that it is legitimate, the payment will be reversed. The process works well when used as intended. But the way people shop has changed, and opportunistic criminals are multiplying. The e-commerce industry has also grown too fast for the payment industry, and anytime a cardholder requests a chargeback without a valid reason, it is immediately committing friendly fraud.
Merchants have a way to defend themselves against chargebacks through a process called conflict resolution, mediated by the cardholder. But the steps involved in this are usually time-consuming and tedious. Businesses, especially those who use digital payments,must impose several ways to prevent this kind of fraud.
To prevent friendly fraud, merchants must:
- Use a clear descriptor for its merchant account.
- Collect relevant information about the customer and the transaction at the point of sale, and notify customers of the purchase details.
- Implement chargeback detection strategies.
- Employ 3D Secure protocols to add security to debit and credit transactions.
- Use FIDO2 passwordless authentication to supplement risk-based verification of 3Ds simultaneously with online payment.
Furthermore, using passwordless authentication for payment authentication boosts fraud prevention as it eliminates the security risks associated with the traditional use of passwords. This involves using biometrics forverification like fingerprint and face recognition.
Learn more about friendly fraud and how to prevent it by visiting LoginID’s website.
