How the payment methods you accept may affect fraud rates

Credit card payment

Fraud is an expense that almost every business must factor into their revenue versus loss model.

It is important to note that customers deserve to be taken care of, but some of them will throw you for a loop.

A great deal of online payment fraud risk will end up occurring when you accept payment from an individual who is impersonating someone else. While many payment methods do a great job of weeding out such incidences, there are some that do not accomplish this objective very well. That is why the payment methods that you choose to accept may affect your fraud rate in the end.

Payments by Card

Card payments are obviously one of the easiest ways for customers to pay, so it is not surprising that they are also preferred by the majority of businesses. Today, they account for just over 40 percent of all payments that are made online. With such a variety of card providers out there today, most customers around the world have access to this method of payment via either debit or credit card. The major benefit of using this form of payment is that the business will receive instant confirmation of the transfer of funds. It is also simple to issue refunds to the same method of payment. At the same time, there is a high risk of fraud since credit card numbers are relatively simple to steal. When that happens, a chargeback will be initiated and it can take a lot of work on the part of the business to rectify the situation.

Payments Using Digital Wallets

The use of digital wallets is on the rise. This is a way of storing money online that customers can then use to make payments by either using their computer or mobile device. These are commonly referred to as e-wallets. Some of the more common ones in use today are Apple Pay, AliPay, and Google Pay. They have the added benefit of requiring authentication before they can be used, while also providing instant payment confirmation. The risk of fraud is reduced, but it is still there. If a hacker acquires the user’s login information, then the funds can be used for multiple purchases before the fraud is caught.

Payments Via PayPal

PayPal is used in over 200 countries around the world today. It has created its own fraud prevention strategy and is known to be largely successful. That being said, fraud is still an issue and chargebacks are a common occurrence. In addition, the company can suspend a business account for any level of suspected fraud. This essentially blocks access to any money you have in the account until the matter is sorted out in your favor.

Payments by Bank Debit

A bank debit can be initiated directly by the consumer. The money is then deposited into the account of the business. There are numerous integrations that can make this possible. Many businesses prefer this payment method for recurring subscription-based purchases. The added benefit is that there tend to be fewer disputes with this type of payment than with others. However, bank account information is commonly hacked. When that happens, fraudulent activity can occur that will need to be dealt with in a swift manner.

You will want to weigh the risk of fraud for each of these payment methods against the revenue that is generated by using them. Part of running a successful company is making sure that your customers find your payment methods appealing to them. You want to provide as many methods as possible so that you can maximize revenue, but you also want to do your part to minimize fraudulent activity as much as possible. If you can do that, then you will end up being successful in the long run.