risk

Five tips on protecting your business and customers from fraud

December 13, 2013
2916 Views

thief Five tips on protecting your business and customers from fraud

Protecting your business

If you are a business or start-up, especially one which is a platform serving many users and accepting payments on that platform, you should be thinking about fraud risk and how exposed your platform might be to this risk. John Canfield, VP of Risk for WePay – a payments API provider powering hundreds of platforms, shares his top five tips on protecting your business in his own words below.

bar Five tips on protecting your business and customers from fraud

1. Know your enemy

First, you have to understand whom the enemy of your platform or marketplace is. You might not realize that there are lots of different kind of fraud and loss – including merchant identity fraud, merchant credit risk and buyer identity fraud. Most likely, you’ll be concerned with collusion fraud. What this means is someone setting up a merchant or fundraiser account with a fake or stolen identity, then using stolen credits and fake buyer identities to pay their own merchant account. They get the money and disappear, but you are stuck with the charges.



Advertise at AG

2. Simple tools to start

One of the first things you can do is actually pretty traditional. Using a vendor like Experian, Equifax, or Lexis-Nexis, you can validate that your user’s identity is a real one that matches their database. If needed, you can also check their business credit and history.

3. Social data as your secret weapon

However, to get more advanced, you should consider social data. It is easy enough to do a social search based off an email address – you can see whether someone has a Facebook or LinkedIn profile and whether it matches a verified email they gave you. A long-established social profile that matches their name and e-mail is an asset they have that is difficult for a fraudster to synthesize. WePay uses social data and algorithms to power our own VedaTM risk analysis engine.

4. Risk Management – Trust – Growth

Managing payment risk protects you against losses from chargebacks. It also improves the trust in your platform by weeding out bad merchants that lead to bad buyer experiences. Trust and excellent buyer experiences reduces churn and accelerates growth.

5. Don’t wait

Fraud is unlike most business phenomenon because it is highly non-linear. You can have zero fraud one week and be in an all-out attack the next. One company found that their fraud attack was being spurred by a fraud blog post explaining how you could make a quick $500 off their site. Don’t let this happen to you. Even if you do not see any fraud today, you need to have at least basic defenses and a rapid response capability in place to be prepared. Of course, alternatively, there are many providers, such as WePay, whom you can use so that you don’t have to take on this burden yourself.

John Canfield is the VP of Risk for WePay. WePay provides a payment API specifically designed for companies who want to enable many small users to accept credit cards on their platform without taking on the fraud risk and operational burdens associated with payments. WePay powers some of the top platforms including GoFundMe, StayClassy, CustomMade, Honeyfund and hundreds more. Prior to WePay John was Sr. Director of Risk at eBay.

Marti Trewe reports on business and technology news, chasing his passion for helping entrepreneurs and small businesses to stay well informed in the fast paced 140-character world. Marti rarely sleeps and thrives on reader news tips, especially about startups and big moves in leadership.



Weigh in...