How is credit card fraud analysis performed?

The credit card is one of the most used means of payment in businesses and service contracts. Therefore, managers need to know how to approve purchases and avoid falling into credit card fraud.

Even if the company has good intentions and does not want to bring more difficulties to customers, it is necessary to beware of situations that cause problems. After all, fraud can lead to high costs and even legal problems.

Do you want to know how credit card fraud works and what are the risks for the company? Then check out this content!

How do credit card fraud work?

Any means of receiving amounts is subject to fraud. Even when payment is made in cash, the bills can be counterfeit, which poses risks for the company.

As the credit card is one of the most used forms of payment, it is also widely used by scammers. However, it is not feasible — nor recommended — for the company to stop accepting this form of payment. In fact, the ideal is to know how to prevent yourself.

Therefore, managers must know how credit card fraud works . This knowledge helps to avoid risks and allows taking measures that help to reduce or even end these situations.

Scams are committed by people with bad intentions, usually when using a third-party card or simulating a payment with a non-existent card.

It is worth noting that fraudsters do not necessarily use an adulterated physical card. Currently, there are frauds carried out virtually. In some cases, the data is correct, but it was acquired illegally.

In this way, occurrences can cause damage both to consumers who had their cards used and to the company that made the sale. Therefore, paying attention to these situations and creating a good prevention routine is essential in business.

What are the risks for the company?

When thinking about the risks that card fraud generates for companies, they are not always easily visible. This happens because most of the occurrences do not bring direct financial losses to the business. After all, money is received – and it will not always need to be refunded.

However, there are scams that use erroneous or simulated data and make the purchase approved, even if there is no possibility of payment. In these cases, there is a great financial risk for the business, since the sales amounts on the credit card will not be received.

In addition to the financial risk, managers must consider the consequences for brand reputation. When credit card fraud occurs, the affected consumer will have information on where it happened.

That way, he will realize that the seller did not take the necessary care to avoid the problem – and he will be able to charge the business directly. Faced with these situations, it is quite common for consumers to fail to indicate the company to their family members and acquaintances.

As the fraud occurred, he will not have the necessary confidence to speak well of the products, customer service or services performed. Still, there are risks that the injured consumer will make negative evaluations and complaints on the internet.

Finally, it is worth considering the risk of lawsuits. Although the company is not at fault for the fraud, it may be liable for the damage suffered by the consumer.

In this case, the decision will depend on the judge’s analysis – which may or may not result in the ordering of reimbursements to the client. However, in any case, the company will have expenses with the process, such as court costs and attorney fees.

How is a card fraud analysis performed?

With all these risks related to credit card fraud, managers need to conduct a sales analysis to prevent these situations.

To this end, it is possible to adopt several initiatives. The first concerns the validation of the identity of the buyer and the holder of the card used. This step is more relevant in e-commerce, but it is possible to use it in physical stores.

The idea is to confirm the identity of the buyer, through the verification of documents. It is also worth checking that the cardholder is the person making the purchase. This way, it will be more difficult for fraudsters to be able to use cloned cards.

In addition, it is essential to prevent third parties from having access to the card machine, as they can be tampered with to leak data.

Another way to carry out a fraud analysis is to rely on systems that have a large customer database and provide bank reconciliation. Thus, the information can be crossed to identify irregularities.

It is common for customers to have a certain consumption pattern, using the same payment mechanisms. When one of these characteristics deviates from the standard, there is a yellow signal for the company.

This happens, for example, when the payment made is much higher than usual, the frequency of purchases is very different or the delivery address has changed. When identifying these alerts, it is possible to adopt other means to confirm the identity of the buyer and the authorization of the purchase, if applicable.