Protecting merchants for fraudulent activities through PSPs

By David Lambert, Commercial Director at Transact365
David Lambert, Commercial Director at Transact365, speaks about how the company leverages technology to ensure transactions are completed securely

The rise of e-commerce and global payment providers has transformed the way in which merchants are able to access emerging markets. By understanding the complex infrastructure of payments systems at a national and international level, providers like Transact365 leverage next generation technology to ensure transactions are facilitated securely and quickly. 

However, the digitalisation of global payment systems has also brought additional risks for businesses to consider - namely, increased exposure to online fraud and cyber breaches. Of the companies susceptible to such threats, online retailers are a top target for hackers. A report from 2018 revealed that 90% of total login attempts were illegitimate hacking attempts. In response, the financial system as a whole is employing measures to prevent hacking and fraud activities. 

While industry standards have improved since then, the need for merchants to engage with global payment service providers who offer security payment gateways is paramount. Rather than making the online checkout process an arduous process, merchants need to optimise the checkout flow through effective security systems that protect all parties involved in the transaction process. 

Merchants need to prioritise effective and targeted security processes over blanket measures which increase the chances of a false decline occurring. According to research, approximately $20.3 billion is lost at online checkouts each year in the US, UK, Germany and France due to false declines. 

How then can merchants ensure legitimate transactions can be facilitated? 

Part of this is through the application of sophisticated scoring systems. As part of payment flows through a value chain, two questions are asked. First, is the customer who is attempting the transactions the actual cardholder? And if they are the genuine cardholder, will their bank authorise them to make the payment via either credit or debit? 

At this point, the aim for merchants is to accurately answer both questions. 

Payment gateways have an important role to play here, facilitating communication between the customer’s bank and the merchant, and ensuring the transaction is encrypted throughout the process. At Transact365, we protect buyer's data by ensuring encryption through Secure Socket Layer (SSL) and Transport Layer Security (TLS), backed at the application level by the RSA algorithm with a key length of 2048 bits.

With the volume of online transactions increasing, the reduction of fraud and chargebacks is a top priority for all online merchants. For each merchant we work with, we assess four areas of risk - fraud, friendly fraud, credit exposure and reputational risk. On top of this, we apply our thorough knowledge and understanding of specific industries to understand the general type of processes that take place and pinpoint areas that could be susceptible to fraudulent activity. Doing so allows us to monitor customer activity and review what could be a suspicious ticket based on the size or nature of the transaction. 

As a result of this, Transact365 has set an industry benchmark. While we facilitate billions of dollars through our payment gateway, our chargeback ratio has remained under 0.006%. It is this standard that offers merchants peace of mind knowing legitimate transactions will be facilitated, backed by sophisticated anti-fraud instruments. 

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