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Business fraud is a real and growing problem. With organizations losing a significant portion of their revenue to fraud every year, if you think your data is safe on the Internet without ample security measures, you’re mistaken.
Think about it—cybercriminals will target anything and everything under the sun they find easy to access and break into. It’s just a matter of how tightly secured your server is and how aware you are of all the vulnerable points in your business.
This article discusses the kinds of frauds your business is susceptible to and our top five strategies to prevent such mishappenings and nip them in the bud.
What kind of fraud we’re talking about
While business frauds were always prevalent in the corporate world, the pandemic made businesses more vulnerable to them. Reason? The shift to the digital landscape, employees working from home without proper security measures, transactions happening within an unprotected network, and other implications of the new setup.
In today’s hybrid work culture, if organizations aren’t taking security measures, it’s easier to steal and misuse their data and their customer’s data.
Here are the number of ways fraudsters are targeting businesses:
- Loyalty fraud: It’s when fraudsters target businesses with loyalty programs that offer redeemable points for cash, product or services, or other benefits. In most cases, they either successfully find a loophole in your loyalty program policies or hijack your customers’ database and drain all their reward points.
- Bank account fraud: Often, fraudsters hack into someone’s (read your employees’ or customers’) bank account and steal its funds. While in some cases, they create a new account to carry out their malicious practices.
- Identity theft: This is pretty common in eCommerce, banking, and crypto space, wherein fraudsters pose as someone else to get their way. This involves stolen ids, credit card information, and account details, while the real person is unaware their data and funds are being drained.
- Application fraud: Think only legitimate people fill up your forms or apply for your product. Apparently, fraudsters are big on using stolen information or faking data and reports to acquire what they want.
Five ways to safeguard your business against fraud
While we’ve covered the most common ways in which fraudsters attack businesses, there can definitely be more ways—after all, attackers, too, are getting smarter. Guess what? You can outsmart them by employing these practices in your business.
1. Data analysis to find anomalies
A business deals with plenty of data on a day-to-day basis, and tracking everything to detect suspicious activity will be too time-consuming. Luckily we have business intelligence and machine learning tech to our advantage that can help us with fraud analytics in the most effective way possible.
- Looking at the past data and observing the trends and patterns to form future predictions
- Setting up automatic fraud detection upon receiving a signal outside the expected range
- Protecting each and every layer of transaction and customer touchpoints—from new user signup to how they behave and use the service
- Comparing data to discover hidden variables for a given entity
- Grouping data points to visualize it, making it easier to understand and identify the risks associated with safety
2. Invest in staff training
Creating a culture of fraud prevention is essential to your success. For that, it’s important that you and your employees are fully aware of what constitutes fraud and how it can be prevented. It makes you more proactive in spotting the red flags and loose ends before someone else does and takes advantage.
Make sure each of your staff knows what steps they need to take in response when they see any red alert. For example, if an employee notices suspicious activity on their account or receives an email from someone who seems out of place, they must know well to take immediate action or inform someone.
Create internal policies concerning theft and fraud prevention, or have a consultant help you combat fraudsters online.
Moreover, it’s important that you segregate your employees’ duties and keep them from having access to all information related to an account or transaction. For example, suppose one employee is responsible for processing payments, and another handles customer service calls. In that case, those two functions must be kept separate, and no single person must have access to both areas at once.
3. Secure your financial resources
Since finance is the most important aspect of any business, this is the part you pay the most attention to. Especially in the world where digital payments are most prevalent, it’s easier for attackers to sneak into your systems in a moment of weakness.
Financial crime is more of a global issue today, and companies are continuously working to combat it and keep fraudsters at bay. Though one cannot guarantee complete safety, one must not leave any stone unturned to prevent your precious assets.
Here are some measures you must take to ensure safety:
- KYC verification: This goes without saying how important it is for a business to know who they’re interacting with. Whenever a new customer signs up, it’s your responsibility to conduct a full-fledged verification to confirm their identity.
- Identity verification: In this step, you must validate the information your customer has provided with their KYC. This can be done manually or automatically, depending on the resources you have. You can also take it up a notch by running verification checks through video calls, in-person verification, and so on.
- 2FA: Whether it’s your staff or your customers, account takeovers by attackers can be pretty inconvenient, not to mention highly unsafe. The best way forward is to add layers of protection for the login process using 2-Factor Authentication (2FA) to allow only authorized personnel to pass through.
- Risk monitoring: This is rather a long-term yet the fruitful process that requires you to set Key Risk Indicators (KRIs) for your business and track them. Once you identify a risk, you assess it for its severity and impact and create an action plan to tackle it.
- Data privacy: Thanks to government policies around data privacy, including GDPR and CCPA, it’s your responsibility to give your customers a choice for sharing information, including their financial information. Moreover, they must be informed about how you will use their data.
4. Incorporate real-time data enrichment
Data enrichment helps you find a larger chunk of information with a small data set. This way, you can learn everything there is to know about a small piece of data. But how does this help with fraud protection?
Incorporating data enrichment in your business allows you to:
- Reduce friction in your customer journey
- Track a suspicious activity using an email address or IP address
- Unmask an IP address to know the source of an activity
- Validate a piece of new user information, such as the validity of the information, address, contact information, etc., and check if the user has entered legitimate information
- Check if a user has been using a spoofing software
- Segment users based on their demographics, preferences, data-usage permissions, risk impact, or behavior
5. Stay clear of bots
When fraudsters attack in masses, know that it’s their bot army in action. They could be snagging your referral reward and jeopardizing your marketing strategy by sending in bad users or junk traffic. As a result, your analytics and KPIs get messed up, leaving you with a huge chunk of fake and invalid information.
So, how can you prevent bots from marking your territory and ruining your marketing game?
Here are a few things you must consider to avoid bots:
- Assign a unique ID to your referrals and track the referral traffic they’re bringing
- Measure customer behavior—how many credit cards are they using for payments or how many failed attempts do you see per customer
- Have the basics in place—enable CAPTCHA, deploy a firewall, or use a VPN or proxy
- Understand what kind of device your customers are using—are they spoofing it or masking their IP addresses
Combining these approaches will help you determine whether an IP is a bot or a human customer.
Fraud prevention should be your top priority
Security is often overlooked by most businesses out there and considered an afterthought. Instead, it should be the one factor you must consider parallelly while setting up your business and taking care of the usual processes.
By implementing fraud prevention and setting up security measures, you’re safeguarding your business against financial loss and reputational damage due to fraud. Moreover, you’re preparing to scale your business to great horizons by being one step ahead in ensuring security.
So, take those security measures today and make your business fraud-proof.