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How Recognizing Credit Card Fraud Can Help Prevent B2B Payment Fraud

  • B2B Payments|
  • Business Operations|
Published: 05/13/2019

Nearly all fraudulent credit-card crimes have elements in common. Knowing a few of these common signs of credit card fraud can give your company the upper hand when you are considering how to prevent b2b fraud.

What is Credit Card Fraud?

Before we dive deeper into a few commonalities of credit card fraud, it is important to define what we mean when we say “credit card fraud.” Credit card fraud is the unauthorized use of another individual’s credit card or account information to make a purchase.

Before credit card fraud occurs, an individual typically steals a credit card or comes across a credit card someone else has lost,  breaches some sort of b2b payment system or database to obtain your credit card account information, or has created a counterfeit card attached to authentic–yet unauthorized–account information.

These actions give the individual the ability to access and spend your funds. However, since you have not given the individual the actual permission to do this, all purchases and payments made are considered fraudulent or unauthorized.

Who Does Credit Card Fraud  Effect?

Fraudulent, unauthorized credit card use affects both businesses and consumers–but the damages done to businesses often run deeper than the damages done to consumers. From a consumer standpoint, charges that they have not created themselves will appear in their credit account history, showing that they made a purchase when they really have not.  But to solve this issue, all the consumer would need to do is call their credit company to report this fraudulent activity and cancel their card. According to the Federal Trade Commission, an individual whose card has been fraudulently used is only responsible for up to $50 worth of charges–they will not be liable to cover any expenses beyond that; and if the consumer cancels their card before fraud occurs, they wouldn’t  be responsible for even the initial $50.

From a business standpoint–if your business is a victim of credit card fraud usage–the consequences are typically more severe than they are for consumers. Not only will you most likely be out of the items you sold to the fraudulent credit card user, you will also be responsible for all of the money that needs to be returned to the credit card company who initially covered the fraudulent purchases. In other words, you will be responsible for completing the chargeback.

For B2B businesses where the average transaction is typically much higher than B2C transactions, the impact of those chargebacks are even higher. B2b payment systems frequently have a minimum transaction amount of a few thousand dollars. So not only will that B2B business be out of at least a few thousand dollars worth of merchandise, but they will also be responsible for making sure those funds get returned to the credit company underwriting the purchase.

How to Improve Your Credit Card Fraud Detection

Due to the nature of credit card fraud–fraudulently buying items on a credit line you have not been permitted to use–instances of credit card fraud typically have striking resemblances from case to case. This may be because their goal is to accumulate as many items as they can while they don’t actually have to pay for them, leading to some common behavior from fraudulent credit card users. Here are five (5) common characteristics of fraudulent credit card user behavior.

1. Purchasing an unusual number and combination of expensive, yet resellable, items

In a fraudulent credit card user’s perfect world, they’d get away with purchasing a large number of expensive, yet resellable, items; think jewelry, video game consoles, computer and camera equipment, etc. That being said, if an individual is purchasing a large number of items rarely bought together, there is a strong chance they may be committing credit card fraud. For example, if an individual is buying 3 gold necklaces and 2 PlayStations at the same time–this may be an instance of credit card fraud.

2. Transaction value is well above your average transaction value

At the end of the day, the fraudulent credit card user wants to convert the items they purchased into the highest dollar value possible. That is why they typically try to buy as many high-value items as possible with the credit cards they’ve stolen. And although big-ticket purchases are not uncommon, making several big-ticket purchases at the same time may be unusual depending on the merchant. A consumer, for instance, doesn’t usually go to Best Buy and purchase the latest 80 inch TV, laptop, and stereo system available all in the same shopping trip.

With that in mind, stay alert when an individual paying with a credit card is spending far more than your store’s average transaction value. Using this gauge may be a challenge when watching out for  B2B payment fraud. Because B2B transactions are on average 3x greater than your average B2C transaction, frequently in the thousands of dollars, large transactions could seem more normal. This can make B2B businesses more susceptible to credit card fraud, as you may not find out about the unauthorized transaction until your business is hit with a chargeback.

3. The card user requests that the card be keyed and not swiped

Someone committing credit card fraud might request that their card number is keyed into your computer system manually, instead of swiped at your point-of-sale terminal or fed into your card reader. Although it is possible that their card really does malfunction, it could also be a sign that they are using a counterfeit credit card, whose swipe and chip functions are faulty and do not work with legitimate systems and software.

4. Multiple orders to the same shipping address–but with different billing addresses

Fraudulent credit card use is not limited to in-store purchases at brick-and-mortar locations–it also occurs frequently during online Ecommerce shopping. If an individual orders multiple items from the same online store in a short amount of time, and all of the purchases have the same shipping address but different billing addresses, there is a good chance that this person is committing credit card fraud.

5. The card lacks a magnetic strip or chip

Finally, our last fraudulent credit card spotting tip is to be on alert when a customer is trying to use a credit card that does not have a magnetic strip or chip. As of June 2017, Visa had distributed over 449 million cards with EMV chips for added payment security, and most likely, that number has grown since then. So if a customer’s credit card doesn’t have either a magnetic strip or chip in this day and age, then there’s a good chance it is because they’re using a fake credit card.

Good Clues – But Not Hard-Proof

It is important to remember that just because these are common behaviors indicative of credit card and b2b payment fraud, it does not mean that there is a 100% chance of credit card fraud if one or even a few of these elements are present in a credit card purchase. It could very well just be an anomaly taking place. There have probably been instances when your own credit card didn’t work properly the first time it was swiped, or where you made a purchase that was above a store’s average purchase amount. While these types of transactions may be rare, they’re not impossible.

Being aware of these signs is a good starting point in detecting credit card fraud, as well as a strong starting point in your research on how to prevent b2b payment fraud. When you are aware of the commonalities of fraudulent credit card use, you can construct a preventative strategy that effectively reduces the number of chargebacks your business experiences in the long run. Just think of the massive losses–and chargebacks cases–you can prevent if you’re able to identify payment fraud before it happens!


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