Fraud can have devastating effects on businesses, their reputations, and finances. UK Finance reported that in 2018 alone, criminals successfully stole £1.2 billion through fraud and scams, so it's more important than ever to keep up to date with the latest information on how to prevent your business or customers falling victim to fraud.

Fraud at a glance

There are hundreds of different fraud tactics out there; here are those that tend to be most prevalent.

1. False claims - This type of fraud occurs when a consumer makes an online shopping purchase with their own credit card, but then requests the money back from the issuing bank after receiving the purchased goods or services. This is commonly called a chargeback and can often occur unknowingly, such as if a child buys credits for a game using their parents? linked credit card without the parent realising. However, it is also often done with malicious intent.
    
2. Data breaches - If a company's network lacks adequate security, this leaves its systems wide open to a data breach. This is when criminals gain unauthorised access to a whole host of information, including sensitive business information and personal customer data including bank details, passwords, addresses and more. Stolen customer personal and financial data is typically sold on to fraudsters who then use the information for making purchases, taking over accounts and applying for credit.
    
3. Phishing - Phishing is the process by which fraudsters obtain customers? private details by masquerading as a legitimate company. For example, a fraudster sends an email  convincing the recipient that it's from a retailer they frequently shop with. The consumer follows the directions to click a link and fill out the details ?necessary to continue shopping with the retailer? or similar. The fraudster then harvests these details to either commit identity fraud or simply take the money directly from the victim's account.

The risks

The main risk businesses consider when they think ?fraud? is  financial. If a company is out of line with regulations and suffers a data breach, for example, they can be fined up to £17.5 million. If merchants don't keep a check on false claims, they can lose out on money as well as stock.

Furthermore, fraud doesn't only affect businesses financially. If companies are associated with data breaches or poor fraud prevention management, they risk damaging their reputation.

A note on regulation

One of the most recent security measures, the General Data Protection Regulation (GDPR), came into force  in May 2018 to tighten up the processing of personal data. As is often the case when new regulations are implemented, businesses were at first worried about how this may impact their operations, but over time and with the help of experts, these fears were alleviated. Thanks to GDPR, consumers now enjoy greater trust in merchants when they shop online.

In terms of payments, some other important regulations to understand are the Second Payments Services Directive (PSD2) and Strong Customer Authentication (SCA). PSD2 has improved customer rights, enhanced security through SCA, and provided a framework for new payment and account services by enabling third-party access to account information. Meanwhile SCA itself has increased security by enforcing extra authentication measures at checkout.

How merchants can act

1. Learn - As a merchant, take time to understand the latest regulations and fraud practices as best as you can, reading expert blogs and following industry-specific news publications.
    
2. Educate - Warning them against current fraud practices like phishing, for example, will reduce their risk of falling victim to scams of this nature. Similarly, letting them know any updates to expect in terms of fraud prevention or regulation can contribute to a seamless user experience. For example, SCA's Two Factor Authentication policy has been seen to flummox customers, leading them to abandon online shopping baskets. User experience issues such as this can be avoided by communicating with your clients.
    
3. Act - Make sure to implement measures earlier rather than later. The best way to combat fraud and related issues is to hand over to a professional who can advise on and implement the best course for your business. Although fraud is complicated, a secure payments system backed by a team of experts is an essential step to helping prevent fraud and optimising business operations.