How Wave's risk team helps protect your business

Online payment platforms: How to stay secure and safe

April 14, 2023
5 minutes read

Dealing with fraud is part of living in a digital world. This is why it’s more important than ever to think about your safety and security when choosing the right payment platform for your business.

Unfortunately, instances of honest account holders falling for scammers’ tactics are increasing. According to Juniper Research, businesses who sell online are expected to lose $130 billion to online payment fraud between 2018 and 2023. 

That’s a lot of money, especially when you’re freelancing or in the early stages of running your business. 

Luckily, the team here at Wave is here to give you the latest info on how to keep yourself safe—and be transparent about the processes we use to protect your money and your business. We’ve built a highly skilled risk team that’s responsible for protecting not just Wave, but also the brave small business owners we serve, from financial loss.

Keep reading to learn how online payment fraud may affect you, and how you can protect your business.

What is online payment fraud?

Online payment fraud is when online criminals conduct illegal transactions, usually using stolen personal information and/or debit or credit card details. 

What are the different types of online payment fraud? 

Here are some common types of online payment frauds that target customers and scam them into sending money through some online payment platforms: 

  • Fake grants: Scammers tell customers they’ve won free money—but first, the customers need to send them money before getting the grant. 
  • Fake vendors: Scammers only accept online payments in exchange for their products. Customers send the money, but the purchase never actually arrives. 
  • Fake customer support: Scammers reach out to customers pretending to be customer support, and trick customers into giving them their login information. 

How this affects business owners like you 

Even though some platforms have fraud detection programs, they may not be strong enough and could put your hard-earned cash at risk—which is why it’s so important to do some digging into any online payment platforms you plan to use for your business.

Since money changes hands so quickly in our digital age, it makes it even easier for fraudsters to evade security measures and steal your money using digital payment platforms. 

But it’s not all doom and gloom—we have suggestions on steps you can take to protect your business and your money!

What you can do to prevent online payment fraud 

Okay, time for the good news. Customers and online payment platforms aren’t helpless against digital payment fraud—there are best practices and tools that online payment platforms can use to detect, monitor, and stop fraud before it happens to keep business owners like you safe. 

When choosing an online payment platform for your business, here are a few factors to consider about the company: 

  • Tools: Does the company have a dedicated risk team and software/tools to prevent fraudulent activity from happening on their platform? 
  • Identity verification: Does the company conduct identity verification to protect against money laundering or other fraudulent payments happening via their platform? 
  • Monitoring: Does the company use tools to proactively monitor for fraudulent activity (and appropriately block any fraudsters before they strike)? 
  • Compliance: Does the company adhere to appropriate security measures, regulations, and laws? 
  • Support: Does the company offer education on how to protect yourself from online fraud, and/or offer support if you’ve been scammed? 

A good example of all these pillars coming together is Wave (👋hi, that’s us), so we’ll use ourselves to give you a picture of what you can look for when choosing a safe and secure online payments software. 

Example: What Wave does to protect you from fraud

As promised, we’ll go over the measures the risk team here at Wave takes to protect your money and business. Wave has a robust risk and compliance program designed to constantly and proactively detect fraud and other high risk and criminal activity on our platform. 

Wave’s risk team works to give business owners a safe and secure environment for processing online payments, while ensuring we comply with the laws in the countries where we operate, as well as industry best practices for payment processors.

The risk team’s expertise spans across compliance, fraud, and credit risk. We monitor all payments for fraud and compliance violations, making sure nothing illegal or non-compliant happens inside Wave.

How we stay compliant 

Wave’s risk team has to follow the USA Patriot Act (in the US) or the Proceeds of Crime (Money Laundering) and Terrorist FInancing Act (PCMLTFA) (in Canada) in order to be considered “compliant” and allowed to process payments for our customers. 

We monitor all new signups and money movement for fraud risk, and to make sure every Wave customer is compliant and passes mandatory Know Your Customer (KYC) and Know Your Business (KYB) regulatory requirements. 

KYC involves several steps that ensure we know each of our customers’ identities, their business activities, whether the source of their funds is legitimate, and their risk of money laundering, phishing, and tax crimes. 

KYB is similar to KYC, but pertains specifically to businesses and suppliers. Both KYC and KYB follow Anti-Money Laundering (AML) standards, which are exactly what they sound like: laws and regulations that prevent financial crime and money laundering. 

We also passed the rigorous audit process required to get our Money Transmitter License (MTL) in applicable states, which increases safety for our customers using our online payments and payroll features. 

An MTL legally lets businesses that receive and transfer funds on someone’s behalf provide financial services, and helps us uphold a high standard for our processes around security, privacy, KYC/KYB, and AML transaction monitoring.  

What’s different about Wave’s approach to fraud protection? 

Here are a few examples of the things we do to keep our customers safe and catch fraudsters before they start using our online payments feature:

  • We approach risk management purposefully, making compliance and fraud detection a top priority so we can act fast and stop fraudsters from using our online payments feature as early in their process as possible 
  • We use advanced analytical tools to identify suspicious behavior, like identifying if your customer actually isn’t who they say they are 
  • We prioritize the security and safety of our features over cutting corners for the sake of growth and revenue 
  • We build and release products—and move money—responsibly, making us a great partner in the fight against financial crime
  • We support new businesses that are at a greater risk of getting chargebacks by educating them on how to identify and protect themselves from potential scams, and document their activities properly

This is why a) you need to apply to use Wave’s online payments feature and b) the application process for this feature is so rigorous. 

We have a responsibility to know every business on our platform and understand what they’re accepting payments for. Ideally, we’ll have the information we need to satisfy these requirements from your online payments or direct deposit application, but sometimes we can’t verify all the information we need. When that happens, our risk team will reach out for more information like social media links, your business license, and other items that can help us verify and better understand your business.

It might seem like a pain to go through at first, but it’s all to protect you and other businesses and stop fraudsters from using our online payments feature for criminal activity (so it’s well worth it, in our opinion!).  

Protecting yourself from fraud 

Protecting you from fraud is our biggest concern. The unfortunate reality is fraud is on the rise, and it can be very costly to a small business owner who is financially liable for any potential loss.

The good news is we have a highly skilled team and advanced analytical tools to detect this activity. We see numerous types of fraud, from purchasing items or services with stolen credit cards, to scamming unsuspecting merchants out of thousands of dollars, to Account Takeover (ATO) Fraud, where a fraudster accesses your account and moves funds into their own bank account.

We can see a lot of data on your cardholder and account activity that you can’t, which allows us to identify suspicious behavior. We can identify if your potential customer isn’t where they say they are, or if they’re not who they say they are.

We use device analytics and other third-party tools to give us a well-rounded assessment of the risk of each payment. Our amazing team of engineers built an in-house risk engine that consolidates all of the relevant information on your business and your customers to help us make as accurate a decision as is possible. Public data is compared to what your customer provides for our highly trained team of risk analysts to investigate any inconsistencies.

Protecting yourself from chargebacks

Another responsibility is to ensure you understand the risk of chargebacks and your liability. It’s very important that you understand the types of chargebacks that can affect your business, and are properly armed with the right documentation to protect yourself if a falling out with your customer happens.

Some business types are at a greater risk of chargebacks than others, so we may reach out from time to time to help you understand those risks and confirm that you’re obtaining the right documentation to protect your business.

Wave has a shared financial liability if your business can’t cover the amount of a chargeback, so this precaution is both to protect you as well as us as a financial services provider.

We understand there are some growing pains with starting your own business, and chargebacks are not always well understood. We know cash flow is a major concern for new businesses, and receiving an email from the risk team telling you that your payments are on hold can be startling, intimidating, and downright frustrating.

Over 90% of our tickets are resolved within one business day, so the best thing you can do when you receive an email or phone call from a risk analyst is to provide exactly what was requested. Anything you send to us is kept confidential and we’re always happy to provide more context should you have any questions or concerns.

When you need us, Wave’s risk team is here to protect, empower, and educate you to become a savvy business owner who understands and is prepared for the risks of running a business. If you ever have concerns about a particular customer or payment and would like our experts to take a closer look, you can contact support through our chatbot, Mave. 

Protecting yourself from online payment fraud: Next steps

While all the headlines about online payment fraud can understandably evoke a lot of anxiety, there’s no need to fear all the great online payment platforms designed to help you run your business. The benefits outweigh the potential risks as long as you choose platforms that make safety, security, and payment fraud prevention as much of a priority as you do.

You can do your best to protect yourself by educating yourself on common scams that target small business owners and choosing an online payments software, like Wave’s, with strict security and anti-fraud measures.

By arming yourself with the knowledge and tools to manage your money safely, you can get back to running your business—with a little more peace of mind.

By Angie Dobbs

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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