Visa Stresses Education as Small Businesses Confront Fraud Vulnerabilities

SMBs, small businesses, scams, fraud

Most crimes, as the saying goes, are crimes of opportunity.

And that’s bad news for small businesses, whose lack of resources and challenges when accessing financing often leaves them ill-prepared for fraud schemes and scams — particularly given the shot in the arm that innovations like artificial intelligence (AI) have given to bad actors.

“Larger businesses, they may have some tools inside to prevent fraud and scams … but smaller businesses typically have a little less sophistication,” Mike Lemberger, senior vice president, chief risk officer, North American Region at Visa, told PYMNTS CEO Karen Webster.

With the use of generative artificial intelligence (GenAI) and other emerging technologies, scams are more convincing than ever, leading to unprecedented losses for consumers, and Lemberger highlighted the emergence of “triangulation fraud” schemes — a complex process where scammers set up fake websites offering high-demand goods at significantly reduced prices.

Unsuspecting buyers, lured by the promise of a deal, input their payment credentials, which the scammers then use to purchase real products using another victim’s stolen credentials. The buyer receives the item, unaware of the illicit process behind their transaction, while the scammer profits from the price difference and potentially uses the buyer’s credentials for future scams, Lemberger explained.

“They’re using tools to automate this … They’ve got skimmers set up on their site,” he added.

This level of complexity not only allows scammers to steal directly from consumers but also to maintain a facade of legitimacy, often receiving high ratings from satisfied customers who are oblivious to the scam.

In just one month of 2022 alone, the payments industry estimated triangulation fraud led to merchant financial loss of $660 million to over $1 billion.

Businesses and Consumers Are Vulnerable

The calculated strategies fraudsters employ to deceive both businesses and consumers are catching fire across today’s digital environment, where purchases increasingly happen online. 

It has created a juxtaposition where a lot of the tools that are very helpful in getting small businesses off the ground, such as creating a website and a social presence, are also being used by fraudsters to penetrate their defenses. 

“If you’re taking payments online, there are vulnerabilities there,” stressed Lemberger.

He said Visa is seeing a lot of smaller businesses being vulnerable in three main categories: traditional Main Street businesses; online-only stores; and businesses within the creator and content economy.

Main Street businesses tend to be vulnerable on the supply side and via omnichannel attack vectors; while online stores suffer from first-party fraud, triangulation scams and other digitally native schemes. Content creators can be vulnerable through the payments and micropayment mechanisms they rely on for their livelihoods, as well as behaviorally driven scams.

One of the key takeaways, Lemberger said, is the critical role of awareness and education in preventing fraud. The allure of an unbeatable deal often clouds judgment, leading consumers and businesses alike to overlook potential red flags.

Fighting Fraud Is a Team-Based Effort

Lemberger emphasized the importance of collaboration within the network to combat fraud.

“We’re only as good as the community,” he said. “Visa doesn’t have the silver bullet for every fraud.”

He highlighted ongoing efforts to stay ahead of scammers, including investing in technology and sharing information across the network to identify and address emerging patterns of fraud.

The fight against fraud demands a collective effort. And as businesses and consumers navigate an increasingly digital landscape, awareness becomes paramount. Recognizing the signs of deceit, from suspiciously low prices to unfamiliar payment processes, can mean the difference between falling victim and staying secure.

“If it doesn’t feel right, verify with your financial institutions and use the trusted brands that you know — and that will provide a good layer of protection,” Lemberger said.

Visa’s commitment to sharing insights and investing in innovative technologies reflects a broader imperative within the industry. By fostering a culture of information exchange and leveraging cutting-edge tools, stakeholders can adapt to emerging threats and fortify their defenses against exploitation, Lemberger said.

Ultimately, the battle against fraud is a dynamic one, and businesses and consumers must remain vigilant, educating themselves about the signs of fraud and working together to create a safer business environment for all.

With National Small Business Week coming to a close, it’s never been more important for small businesses and entrepreneurs to protect both themselves and their customers.

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