Fighting back against fraud: How the right Payment Service Provider can help (Delia Pedersoli)

The UK has the highest level of credit card fraud in Europe, with over 134 card frauds per 1000 people and the average victim losing out to the tune of £8,833 according to think tank
Social Market Foundation.

As the vital link between acquiring and issuing banks, ensuring payments are made correctly, payment service providers (PSPs) have an important role in safeguarding against criminal activities in the payment process. With retailers liable to payouts and reputational damage following incidents of fraud, selecting a reputable PSP that can help combat this growing threat without creating unnecessary friction in the customer experience is a must. So, what does best business practice look like?

Regulatory expertise

Firstly, when selecting a PSP, merchants should look to work with payment service providers that understand the unique and often changing regulatory requirements of the territories and markets within which they operate. This is especially crucial when cross-border payments are involved. Knowing what sanctions might be in place against doing business with certain companies and regions needs to be thoroughly investigated and understood. All international payments should also be screened by the Swift gateway to ensure anti-money laundering and KYC compliance.

For payment service providers, it’s not a secret that complying to regulation can be costly and does impact profitability. However, third-party regulation, auditing and adherence to these requirements is crucial as it ensures good business practices across the industry and must be viewed positively.

Automating disclosure

Secondly, enormous value can be added to the end customer experience at the moment fraudulent activity is suspected. PSPs must have the right systems and controls in place to manage the risk of financial crime and alert users, as well as merchants, of potential criminal activity.

Automating these processes will reduce the time customers are infringed by checks on the authenticity of transactions. Alerting customers to potential fraud by SMS messages, and other digital channels, or asking for a second type of check to take place, also ensures checks can blend more seamlessly into the customer’s normal habits and their payment experience. This is especially important with online retailers, where a security check via a customers’ phone can act as a quick and sensible way to verify an identity.

Ultimately, when it comes to identifying and managing criminal activities, its’ important to look at customers’ behaviour, more specifically, which actions are not normal for that individual and do not match expectations. Increasingly this can involve some form of artificial intelligence to double-check if a transaction falls within a users’ expected profile, location and behaviours. Most forward-thinking payment service providers will seek to find a balance between the two, one that doesn’t take away from the customer experience but still provides the necessary security checks and meets regulatory requirements.

Audit, audit, audit

Lastly, payment service providers are highly regulated and required to adhere to strict requirements laid out by the Payment Card Industry. This involves frequent assessments, and most PSPs will also regularly pen-test the security of their technology and services. Any PSP not maintaining high standards and meeting regulatory requirements should be avoided by merchants. Manually verifying disclosure checks to ensure they are adequate and catching criminal activities when they take place should also form a crucial and frequent part of any PSPs’ audit process.

For merchants, the prospect of fraud and being seen as an ‘easy target’ by criminals can be alarming. Choosing the right PSP that provides an added layer of protection whilst money is in flow, can add peace of mind, reduce risk and safeguard customers without impacting on experience.



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