Skip to main content
The increase in cashless transactions has resulted in fraudsters coming up with new ways to infiltrate a business' payment ecosystem. It's more important than ever that you protect yourself and your business from fraudulent transactions.

Recent events, like the global pandemic, have been catalysts for changes across many industries. In particular, the pandemic brought forth an increase in cashless transactions which are ultimately more convenient and safer for your business than cash.

Read on to learn how you can help guard against payments fraud.

1. Be vigilant about your hiring and training processes

The first line of defense against fraud often starts with your employees. In some instances, payments fraud can either be initiated by an employee or fraudsters may approach them to assist with illegal activity. Ensure to implement strict hiring procedures and thoroughly screen potential employees as fraudsters may attempt to join your business. Train your employees to know the signs of potential fraud and remind them periodically to stay alert. In addition, restrict access to your point-of-sale device(s) to authorized employees only.

2. Recognize e-commerce red flags

Online shopping has become the new normal as more people embrace the advantages of technology. While a convenient way to conduct business 24/7, you must also remain vigilant in order to identify and neutralize any potential threats. Knowing how to recognize red flags is crucial to safeguarding your business and payment ecosystem against fraud. Here are some red flags to look out for when receiving online orders through your website:

  • Multiple cards are being used for payment for a single purchase
  • Multiple orders for products readily convertible to cash (e.g., gift cards)
  • Orders made up of primarily “big ticket” or expensive items
  • Customers requesting rush or overnight delivery
  • Using a single credit card for multiple orders with multiple shipping addresses
  • Orders requesting delivery to an international address especially if the billing address is different from the shipping address
  • Orders with different names, addresses and card numbers but from one single IP address
  • Multiple transactions on a single card over a short period of time
  • First-time customers where orders do not fit “average” customer purchase patterns

3. Take special precautions when dealing with chargebacks

Payment disputes are an inevitable consequence of a digital economy. As in-person manual transactions are replaced by card-not-present payments, the need to fairly arbitrate disputes between merchants and consumers is more important than ever.

Chargebacks are a prime target for fraud. Disputing a charge can be a lengthy process and because the initial payment is made through a credit or debit card, the cardholder can attempt to resolve the charge dispute through the issuing bank instead of dealing with the merchant directly. Unfortunately, both fraudsters and genuine cardholders may take this route, making it difficult to sift out sincere disputes from false ones. When dealing with chargebacks, some precautions to consider are:

  • Attempt to resolve issues with cardholders directly where possible, to avoid going through the chargeback process if possible. In many cases, legitimate client queries can be resolved quickly and directly.
  • Properly disclose items to the cardholder at the time of purchase including click to accept during the online checkout process
  • Assume responsibility for ensuring goods arrive to the cardholder by the expected delivery date to avoid a chargeback
  • Prevent disputes by using a clear, recognizable billing descriptor, offering helpful and available customer service

4. Continue to monitor your traditional payment methods

Traditional forms of payment involving physical exchange (e.g., cheques) continue to pose fraud risks for businesses. Cheque and payment tampering are examples whereby fraudsters will obtain copies of legitimate cheques and use photo imaging technology to create digital copies with altered payment amounts and payee information. The printed counterfeit cheques may be difficult to distinguish from the original. Be sure to actively reconcile your accounts and immediately report any discrepancies.

Consider using digital banking payment methods through online banking. Multi-factor authentication is employed with digital banking to help ensure accounts remain protected from unauthorized access. Business clients can also adopt multi-level approval processes within digital banking, which is another effective control.

Once you’re aware of what to look out for you will soon realize that safeguarding your business is a continuous 24/7 operation and not to be taken lightly. However, knowing how to recognize the red flags can be a good place to begin.

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.