How Banks and Payment Processors are Being Scammed by Fraudulent Websites and Merchants Posing as High-Risk Merchants?

How Banks and Payment Processors are Being Scammed by Fraudulent Websites and Merchants Posing as High-Risk Merchants?

We are living in such an era where there are endless ways to commit fraudulent activities, and this incurs a significant loss to the business. You will come across dozens of merchant service providers who look legitimate, but then sooner or later, you will come to know about their true identity. They offer good schemes, but they are all fake.

Even though digitalisation has been a boon for business owners like you, but it has been equally beneficial for fraudsters to try different ways of stealing money from you too.

What is the most common type of fraudulent activities?

Credit Card Fraud:

A credit card fraud happens when someone you don’t know or have not authorised to use your credit card, gets hold of your credit card details. The fraudster will then use your credit card to make a purchase and gain other material advantages from it. If your high merchant account service provider is a fraud, then, unfortunately, it will become easier for him only to gain access to your card information, but of all your customers too. This way the credit cards get stolen.

Identity theft

Identity theft means taking your identity and pretending to be you to gain monetary advantages. The sheer agenda behind using your identity is to commit fraud and customer data. This is another common type of fraud committed by fake sources.

Friendly Fraud

Friendly fraud is used to denote people using credit cards who initiate chargeback without having any malicious intent. This might happen because they don’t recognise a transaction and approaches the bank to raise the dispute and this in return incurs a significant loss to the merchant. This is a common fraud committed by people against high-risk merchant accounts. When this happens, the issuing bank will recover the payment from the merchants’ bank, and the bank in return will charge the merchant to acquire the loss.

FBI related scams

These frauds are however not difficult to recognise. This happens when someone pretends to work in the FBI and sends an email to a person stating that the receiver has received a huge amount of unclaimed inheritance. The receiver then clicks on the link and fills the form giving out all his personal information along with his credit card details. This way, the fraudster gets hold of every information and steals his personal data and credit card. But, with the increasing knowledge and fishing email scams, people are becoming more and more alert about such fraud emails.

Advance fee fraud

Let’s say you have contacted a high-risk merchant account service provider and you believe the service provider. He asks you to pay an upfront fee for his service, and you end up paying it to fasten the process. Later the service provider disappears stealing all your money. Such cases are known as advance fee fraud.

Refund frauds

Another common fraud that people commit is asking for refunds for a product. They will say that they have never received the product; however, in reality, they might have. This way, the merchant feels obliged to pay for the refund fees and ends up losing money. This is also quite common just like chargebacks.


What happens when a bank or a credit card incurs a loss because of you?

If a person asks for a chargeback or a refund or any other kinds of fines, will be first initiated to your payment processor. It can be either your bank or the credit card company which allows the payment transaction. Readers may note that no one wants to incur a loss and particularly banks and credit card companies. If they suffer a loss because of your business, then be rest assured that it will be levied on you to recover those losses. You will have to pay a financial penalty, which could range in between $5000 to $10,000 depending on the kind of penalties and fines the bank issues. Plus, these instances also make you damage your relationship with your bank and service provider.

Is there a way to prevent chargebacks?

Customers usually charge chargebacks when they fail to recognise an item on their bank statement. When they feel that someone might have used their detailed to make an unauthorised transaction, they right away file a chargeback fraud. Which in reality is not a scam or a fraud. Although, there will still be customers who will intentionally file chargebacks, so to overcome this challenge, follow these simple tips:

Always be honest about what you are selling and let your customers know that for some products, they might not read the full product detail on their bank statement. Tell them, if they do see such a transaction, they should get in touch with you first to confirm the transaction.

Try to use detailed and elaborated product description to avoid such situations.

Make sure that you provide easy to find tracking details to your customers so that they know where their parcel is. Because people also file for chargeback when their payments go through, but they never receive the actual product.

Ensure to have a document conversation with all your customers. When chargeback happens, you as a merchant should also adequate proof that it is a legitimate transaction.

How to protect your merchant account from frauds and scam website?

Although it is difficult to identify fake websites for products and services, still we will give you some essential tips to save yourself from such scatters. There is unfortunately loads of fake online high-risk merchant account provider who made-up to be genuine.

Genuine websites will never make false claims and promises. Neither will they make it hard for the viewers to understand their site. Therefore, always take a good glance at the type of website a merchant has.

Look for a suspicious domain name. People who scam through the fake website will often have a fishy domain name with extravagant colours scattered here in there highlighting bogus claims all over the site, rather than focusing on problem-solving issues. They will manipulate your brain in concentrating more on their offers rather than the real deal. Be careful about that.

Fake websites often have grammatically incorrect content. That’s, by the way, is the easiest way to find out about a fake website.

Also, counterfeit sites will never offer a genuine payment processing gateway. They are in a hurry to make money and not spending money.

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