Pay360 by Capita: Dismiss payment fraud at your peril

By Stephen Ferry, Managing Director at Pay360 by Capita

For businesses, the impact of Covid-19 has changed the way they interact with their customers. In order to survive, many who viewed an ecommerce offering as a “nice to have” have been forced to act quickly and decisively, moving into unchartered territory: by becoming a fully-fledged online retailer. Of course, amidst such dramatic change and uncertainty, this is when fraudsters can thrive.

Many businesses might dismiss payment fraud as only applying to large corporates, but that is simply not the case, as every business will encounter fraud, whether they know about it or not.

According to a recent report in Retail Times, fraudsters are using the surge in online activity to target unsuspecting consumers and merchants. The average ticket price of attempted fraud increased by £14 in May ‘20, driven by electronics and retail goods. During the period from January to May 2020, the fraud attempt rate by value increased to 4.3%. Significant, by any standards.

In light of the dramatic increase in online fraud, businesses need to be conscious of customer contested card payments (“chargebacks”). The intention should be to minimise chargebacks as much possible and the threshold for this is around 1%, though the target should be 0.5%. However, when a merchant’s chargebacks go over 1% this becomes a red flag for many card acquirers. This can result in higher security or rolling reserves, higher charges and, worse case, the card acquirer serving a merchant notice.

To put this into context, according to Chargebacks911, only 18% of chargebacks are even contested by merchants, because they don’t have the internal resource or the technology to contest them. Repeat fraud is also assured, since 2 of out every 5 consumers who commit this type of ‘’friendly fraud” will do it again within two months.

So, where do businesses start? Many businesses are not even aware that they are being targeted or think that the costs of preventing card fraud will be greater than the fraud itself, which is usually not the case at all.

There are many fraud prevention solutions on the market sold as standalone products or integrated within payment platforms. It makes good sense to have a fraud prevention solution baked into your software, to enable the seamless process that merchants and their customers crave. Make sure you shop around to find one that fits into your business, integrates with your existing system and can scale with you as your business grows. Select one that has a straightforward and easy to understand interface and an interactive dashboard that can be connected to multiple data points. Also make sure rules are available to be set up in real time and offer complete flexibility.

Integrated fraud solutions can save merchants thousands of pounds in lost revenue, chargeback costs and administration time, and enhance the right customer payment experience. The key message I leave for businesses is – the threat of online fraud is current and growing. It’s a risk you ignore or underestimate at your peril.

Stephen Ferry
Managing Director
Pay360 by Capita