Merchant-initiated fraud is a serious problem in the payments industry, costing businesses billions of dollars each year. As a business in the payments industry, it is crucial to have a solid understanding of the different types of merchant-initiated fraud and the tools available to tackle it. We will take an inside look at Fraudio's product and how it can help businesses in the payments industry to better protect themselves from this costly problem.

The Impact of Fraudulent Merchant Accounts on Businesses

The impact of merchant-initiated fraud on businesses can be devastating. It not only leads to financial losses, but it can also damage a business's reputation and lead to loss of customers. According to Juniper Research, global software spending on financial crime prevention tools will surpass $28.7 billion by 2027, up from $22.1 billion in 2023. According to the report, the 30 percent increase will be driven by the fight against large-scale and very organised cybercriminals targeting the ever-growing volume of payments over digital channels in order to maximise their profit. It is important for businesses to understand the impact of merchant-initiated fraud and take steps to prevent it.

Understanding Merchant-Initiated Fraud

Merchant-initiated fraud refers to fraudulent activity that originates from merchants themselves. This can include fraudulent activities such as chargebacks, returns, and disputes. It is important to note that merchant-initiated fraud is different from transaction fraud, which is fraudulent activity that originates from customers. Merchant-initiated fraud is particularly challenging for businesses in the payments industry because it can be difficult to detect and prevent.

A Product Designed to Detect Fraudulent Merchants

Our Merchant Fraud Detection product is a cutting-edge solution that uses advanced artificial intelligence to detect fraudulent merchants. The product is designed to integrate and work seamlessly with companies within the payments value chain to provide real-time alerts and detailed explanations for suspicious activity.

One of the key features is its ability to detect fraud early on, before any settlement occurs. This is achieved by analysing real-time transaction data and comparing it to the behaviour of similar merchants within the same segmentation. This allows Fraudio to identify abnormal activity patterns and flag them for investigation.

Another important feature of the product is the ability to detect fraud based on a merchant's meta-data, such as information gathered during the KYB and KYC processes. This information, combined with real-time transaction data, empowers Fraudio to paint a comprehensive picture of a merchant's conduct, making it easy to identify suspicious activity.

The Merchant Fraud Detection product also provides a range of alerts, each with a different severity level. Black alerts are the most severe, indicating that the merchant should be shut down immediately. Red alerts indicate that a fraud investigation should be launched as soon as possible, while yellow alerts suggest that more information should be gathered about the merchant. This allows acquirers to take action quickly and effectively, minimising their financial exposure to fraud.

Overall, the Merchant Fraud Detection product is a powerful solution for acquirers and payment service providers looking to fight against merchant-initiated fraud. Its ability to detect fraud early on, combined with its use of advanced artificial intelligence and real-time data, makes it a valuable tool for protecting businesses from financial losses.

‍

Benefits:

• Real-time alerts: Fraudio's Merchant Fraud Detection product provides businesses with real-time alerts about suspicious activity, allowing them to take action quickly and prevent merchant-initiated fraud before it results in considerable loss.
• Customisable: The product can be customised to fit the specific needs of a business, including the frequency of alerts and the level of severity.
• Cost-effective: Fraudio's Merchant Fraud Detection product is a cost-effective solution, as it helps businesses save money by detecting fraudulent activities before the fraudulent merchants can.

Merchant-initiated fraud is a serious problem in the payments industry, but it can be contained by using the right tools and techniques. By understanding the different types of merchant-initiated fraud, the impact it has on businesses, and the tools available to combat it, businesses in the payments industry can take steps to protect themselves. The Merchant Fraud Detection product is a powerful tool that can help businesses in the payments industry prevent merchant-initiated fraud and save money in the process.

‍