The Winners and Losers of Online Payments Fraud

How does payment fraud affect all the players involved?

Online credit card payment fraud is an unfortunate facet of online commerce - and one that is likely permanent. For every safeguard put in place, there is someone willing to find a way to get around it. While the vast majority of online transactions are uneventful, the threat of fraud is always present.

There is no way to be completely safe from credit card fraud. As was made evident in the infamous Target security breach in the United States, where the information of thousands of credit card holders was compromised, and the recent massive fraud case in India, in which one man was found to have stolen money from 4,500 credit cards, fraud takes many forms and can happen in unexpected ways.

So how does payment fraud affect all the players involved? Who are the real winners, and the real losers?

The merchant
Merchant credit card fraud losses occur mainly on transactions where the card is not presented, such as those done online or in call centers. In 2012, merchants shouldered 37 percent of the burden of credit card losses. Merchants can be especially vulnerable to credit card fraud. If someone purchases merchandise fraudulently, they must often pay back the money to the consumer, and suffer the loss of their merchandise. However, this loss isn't the only way in which fraud can affect a merchant's business.

If merchants fail to act promptly when credit card fraud occurs, or try to save money by cutting corners on fraud prevention technology, they can earn a reputation among their clients as being indifferent at best and disreputable at worst. This can cause distrust and a loss of business.

The credit card company
Credit card companies have safety practices in place to protect consumers, but sometimes they fail. Credit card companies take the lion's share of responsibility for credit card fraud. In 2012, they took on 63% of fraudulent losses. While insurance does compensate for some of the loss, credit card companies are still out a significant amount of time and expense, including the cost of maintaining current fraud prevention measures.

The buyer
In the United States, there are legal protections for consumers that prevent them from being held liable for fraudulent charges, so buyers are not usually directly affected by credit card fraud. However, all consumers are indirectly affected by credit card fraud, as the credit card companies, who suffer huge losses every year, pass those losses on to consumers in the form of higher interest rates and fees.

The perpetrator
If an astute buyer detects credit card fraud, the credit card company will decide whether the cost of investigating the fraud is more than simply compensating the buyer and sending them a new card. Large fraudulent transactions prompt credit card companies to do investigations, which typically involve the police. The police can use detective work, surveillance, and other methods to track down perpetrators. Contrary to popular opinion, the thieves do leave a trail, and they don't always get away with it. Credit card fraud is a felony, and perpetrators can look forward to jail time, plus a permanent criminal record.

What to do to protect yourself or your business
While the prevalence of credit card fraud makes it an unescapable reality for the time being, there are ways buyers and merchants can protect themselves.

Consumers should memorize pin numbers and destroy pin number letters. They should monitor their credit cards continuously for unauthorized charges - not just when they get their statement. When shopping online, buyers should check to ensure that site security measures are in place before entering any sensitive information.

Merchants can also take care to verify the signature and identity of customers before honoring any credit card transactions. They can ask customers for the card verification value number on the back of the customer's credit card, which will at least show that he or she has it in their possession. They can also place a hold on shipments of foreign orders in order to buy time to verify card information and cancel the order if need be.

Finally, and perhaps most helpfully, merchants can use real time credit card processing, which will alert then immediately if a card is lost or stolen, so that they can void the transaction. Better merchant protection is achieved via the use of PCI DSS compliant processing services and platforms; merchants can help ensure they have better protection by inquiring as to how their payment-processing provider manages security and prevents fraud.

More Stories By Eran Feinstein

Eran Feinstein is the founder 3G Direct Pay Limited. 3G provides global e-commerce and online payments solutions for the travel and related industries. He is a leading authority in the fields of e-commerce, travel and payments, having acquired extensive experience from various parts of the world.

Latest Stories
Digital Transformation: Preparing Cloud & IoT Security for the Age of Artificial Intelligence. As automation and artificial intelligence (AI) power solution development and delivery, many businesses need to build backend cloud capabilities. Well-poised organizations, marketing smart devices with AI and BlockChain capabilities prepare to refine compliance and regulatory capabilities in 2018. Volumes of health, financial, technical and privacy data, along with tightening compliance requirements by...
As IoT continues to increase momentum, so does the associated risk. Secure Device Lifecycle Management (DLM) is ranked as one of the most important technology areas of IoT. Driving this trend is the realization that secure support for IoT devices provides companies the ability to deliver high-quality, reliable, secure offerings faster, create new revenue streams, and reduce support costs, all while building a competitive advantage in their markets. In this session, we will use customer use cases...
Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settlement products to hedge funds and investment banks. After, he co-founded a revenue cycle management company where he learned about Bitcoin and eventually Ethereal. Andrew's role at ConsenSys Enterprise is a mul...
DXWorldEXPO LLC announced today that "Miami Blockchain Event by FinTechEXPO" has announced that its Call for Papers is now open. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Financial enterprises in New York City, London, Singapore, and other world financial capitals are embracing a new generation of smart, automated FinTech that eliminates many cumbersome, slow, and expe...
Evan Kirstel is an internationally recognized thought leader and social media influencer in IoT (#1 in 2017), Cloud, Data Security (2016), Health Tech (#9 in 2017), Digital Health (#6 in 2016), B2B Marketing (#5 in 2015), AI, Smart Home, Digital (2017), IIoT (#1 in 2017) and Telecom/Wireless/5G. His connections are a "Who's Who" in these technologies, He is in the top 10 most mentioned/re-tweeted by CMOs and CIOs (2016) and have been recently named 5th most influential B2B marketeer in the US. H...
DXWorldEXPO | CloudEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
DevOpsSummit New York 2018, colocated with CloudEXPO | DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City. Digital Transformation (DX) is a major focus with the introduction of DXWorldEXPO within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of bus...
With 10 simultaneous tracks, keynotes, general sessions and targeted breakout classes, @CloudEXPO and DXWorldEXPO are two of the most important technology events of the year. Since its launch over eight years ago, @CloudEXPO and DXWorldEXPO have presented a rock star faculty as well as showcased hundreds of sponsors and exhibitors! In this blog post, we provide 7 tips on how, as part of our world-class faculty, you can deliver one of the most popular sessions at our events. But before reading...
Cloud Expo | DXWorld Expo have announced the conference tracks for Cloud Expo 2018. Cloud Expo will be held June 5-7, 2018, at the Javits Center in New York City, and November 6-8, 2018, at the Santa Clara Convention Center, Santa Clara, CA. Digital Transformation (DX) is a major focus with the introduction of DX Expo within the program. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive ov...
DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City and will bring together Cloud Computing, FinTech and Blockchain, Digital Transformation, Big Data, Internet of Things, DevOps, AI, Machine Learning and WebRTC to one location.
DXWorldEXPO LLC announced today that ICOHOLDER named "Media Sponsor" of Miami Blockchain Event by FinTechEXPO. ICOHOLDER give you detailed information and help the community to invest in the trusty projects. Miami Blockchain Event by FinTechEXPO has opened its Call for Papers. The two-day event will present 20 top Blockchain experts. All speaking inquiries which covers the following information can be submitted by email to [email protected] Miami Blockchain Event by FinTechEXPO also offers s...
@DevOpsSummit New York 2018, colocated with CloudEXPO | DXWorldEXPO New York 2018 will be held November 11-13, 2018, in New York City. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises - and delivering real results.
The dynamic nature of the cloud means that change is a constant when it comes to modern cloud-based infrastructure. Delivering modern applications to end users, therefore, is a constantly shifting challenge. Delivery automation helps IT Ops teams ensure that apps are providing an optimal end user experience over hybrid-cloud and multi-cloud environments, no matter what the current state of the infrastructure is. To employ a delivery automation strategy that reflects your business rules, making r...
"We started a Master of Science in business analytics - that's the hot topic. We serve the business community around San Francisco so we educate the working professionals and this is where they all want to be," explained Judy Lee, Associate Professor and Department Chair at Golden Gate University, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA.