In a digital world, where online shopping sales soar and transactions occur at the click of a button, safeguarding merchants against ever-evolving fraud and financial crime is key. Far from just numbers on a screen, payment data can offer all-important protection. From discerning suspicious transactions to authenticating customer identities, its role can’t be overlooked. In this article, I’ll explore the crucial role payment data plays in fortifying merchant protection, exploring the measures businesses can employ to safeguard their interests.

Fraud vigilance

Recent findings from fraud prevention firm Ravelin reveal a concerning trend: the number of customers engaging in fraudulent activity is on the rise. One in three online businesses now identifies “criminal customers” as their number one risk factor.

The cost-of-living crisis has contributed to this rise, with the same report highlighting a range of fraudulent behaviours, including claims of undelivered items, counterfeit returns, and abuse of refund or promotion policies. The extent of the abuses led Ravelin to state that online merchants’ own customers are almost as likely to commit fraud against them as organised criminals.

While new fraud threats can emerge and evolve rapidly, merchants can work with payment providers to harness payment data, so they can better identify and stop such wrongdoing. If unchecked and with delays in reporting, fraud can continue for days or longer. By using new technologies such as machine learning algorithms, payment providers can scrutinise payment patterns to detect anomalies and flag potentially fraudulent activities to merchants as soon as they occur. Working with a payment provider that offers real-time fraud detection and prevention helps mitigate financial losses for merchants at a pace greater than criminals can counter.

Payment data can also provide insights into the risk associated with specific payments or customers. By analysing historical transactions and customer behaviour, payment providers like emerchantpay assess the risk of payment related fraud on an ongoing basis, identifying suspicious behaviour such as unusually large transactions or a high volume of transactions within a short period. The payment provider can then take proactive measures to mitigate risk

Regulation compliance

Payment data is a crucial tool for Payment Service Providers (PSPs) in assisting merchants, that provide financial services and respectively operate under a license to meet their anti-money laundering (AML) and know your customer (KYC) compliance and regulatory obligations.

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The upkeep of payment records allows merchants to demonstrate transparency in their financial transactions, aligning with stringent regulatory requirements. For example, PSPs can support merchants by providing access to processed transaction data for an extended period, up to 5 years. By adhering to these standards, merchants mitigate the risk of facing penalties placed by regulatory bodies.

Enhanced customer authentication

By implementing multi-factor authentication (MFA) during the payment process, PSPs can add an extra layer of security to transactions for merchants. This is already mandated in EU and UK and is a recommendation for the rest of the world, to increase security in payments.

Through MFA, users are prompted to provide multiple forms of verification before they can initiate a transaction. This may include things they know (such as a password or PIN), things they possess (like their device), as well as something unique to their identity (such as a fingerprint or Face ID scan).

With the requirement for multiple factors during authentication, cybercriminals face substantial obstacles in their attempts to make fraudulent transactions using payment devices owned by unsuspecting individuals. Biometrics, such as tokenisation through Apple Pay and Google Pay, and behavioural analysis, offer additional layers of security for certain payment types.

Digital commerce demands robust measures to safeguard merchants against the escalating threat of fraud and financial crime. Payment data helps merchants bolster their defences by keeping a close watch on fraud in real-time, complying with regulations and continuously improving customer authentication methods. By leveraging these insights, merchants can navigate online transactions with confidence, pre-empting financial losses and preserving trust among customers and stakeholders alike.

George Ralchev is Group Head of Risk Management at emerchantpay