Payment processing isn’t always smooth sailing. But the occasional slow transaction or incorrect amount is normal and an easy fix. Fraud? Not so much. 

Payment fraud is a real threat in the beauty and wellness world. It hurts your clients, jeopardizes your reputation, and puts your financial security at risk – especially when you end up having to foot the bill.

Here’s a complete guide to payment fraud detection and prevention. Keep reading to learn about the different types of fraud, how it affects your business, and how to protect yourself (and your clients) like the boss you are.

What Is Payment Fraud?

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Payment fraud happens when someone tries to cheat the system and steal money or services using fake or stolen payment information. It’s a shady financial crime with serious consequences for businesses and customers alike. Here’s an example: If someone pays for a service with a stolen credit card, the charge might be reversed, and you may not be able to recoup the losses.

Fraud is sneaky, and it’s getting more common. One study found that a whopping 80% of businesses were targeted by payment fraudsters in 2023. And experts say these attacks could have cost businesses up to $48 billion in total losses – yikes. 

Since payment processing is faster than ever, fraudulent payments can slip through before you have time to notice them. There’s no way to totally prevent fraud, but the good news is that educating yourself can help you fix problems faster and avoid the consequences. 

4 Types of Payment Fraud

So, what does payment fraud look like? Here are four of the most common types:

1. Chargeback Fraud

Chargeback fraud happens when a client disputes a legitimate transaction with their bank. For example, they may claim they never received the gorgeous blowout you know you gave them and make the bank give them their money back.

You can fight the chargeback, but if you lose, the payment gets reversed, so you don’t earn a dime for all your hard work. Plus, you usually have to pay chargeback fees. And if you receive too many chargebacks, your payment processor may even terminate your account – talk about adding insult to injury.

2. Phishing Scams

Phishing scams trick you or your employees into revealing sensitive information, like login credentials or payment details. These scams usually come in the form of a fake email, call, or text pretending to come from a trusted company and asking for your data.

Once phishers have your info, they can access your accounts and drain your funds. Even worse, they might access your clients’ details and lure them into their scam. This can damage clients’ trust in you, which we all know is worth its weight in gold.

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3. Credit Card Fraud

When someone uses stolen credit card information to make unauthorized payments, they’re committing credit card fraud. If one of your clients pays with a stolen card, you could be left holding the bag when they get caught and the payment gets reversed, which isn’t fair to your hard work. 

4. Mobile Payment Fraud

Mobile payment options like ApplePay are super convenient for clients, but the bad news is that they’re also convenient for fraudsters. Scammers can easily exploit digital payment systems to make unauthorized purchases. And just like with other types of fraud, you may end up footing the bill.

How Can Payment Fraud Affect Your Beauty and Wellness Business?

Payment fraud has serious repercussions for any business. First and foremost, the financial losses can hit hard. When chargebacks occur or stolen payments go unnoticed, you lose revenue, and you may be responsible for additional (expensive!) fees.

Payment fraud can also tarnish your reputation. Your clients don’t just trust you with their self-care – they also trust you to keep their information secure. If news spreads that your business is vulnerable to fraud, once-loyal clients might take their business elsewhere. It’s hard to rebuild broken trust, so recovering from these setbacks takes a while. Even worse, if a client experiences fraud at your business, they might leave negative reviews that scare off would-be regulars. 

Why You Need Payment Fraud Prevention and Detection

You don’t want to be left scrambling to recover if payment fraud occurs. Take a proactive approach that stops it in its tracks. 

Here are three ways fraud detection and prevention can benefit you:

Real-Time Protection

Many merchant services offer payment processing solutions that provide real-time protection against fraud. For example, EMV-compliant devices like card readers communicate with the payer’s bank to verify that purchases are legitimate. This means you’re protected if someone issues a fraudulent chargeback.

EMV-compliant card readers also encrypt the customer’s data, so they’re protected if – knock on wood – your system gets hacked or there’s a security breach. Thankfully, GlossGenius offers stylish card readers that are functional and fashionable, so your clients can have an all-around stunning checkout experience.

Automated Monitoring and Analysis

Payment Card Industry (PCI)-compliant payment processors like GlossGenius offer an added layer of payment security: automated monitoring and analysis. These advanced systems use sophisticated algorithms to analyze payment data and identify suspicious patterns that could indicate fraud.

With this kind of merchant fraud detection solution, you don’t have to manually sift through transactions to spot shady activity. The system does the heavy lifting for you so you can focus on what you do best: pampering clients and growing your business.

Financial Protection

The best payment fraud solutions don’t just help you prevent fraud – they also protect your bottom line. For example, Gold-tier GlossGenius users enjoy 100% chargeback protection for payments made with a card reader or Tap to Pay. Even if the client’s bank rules against you, you won’t lose a single penny.

How To Protect Your Business Against Payment Fraud

Feeling stressed about your vulnerability? Don’t panic. Keep your beauty and wellness business safe with these savvy strategies: 

1. Train Your Employees

Your team is your first line of defense against payment fraud. The more educated they are, the less likely a scammer is to pull the wool over their eyes. Give your employees some specialized training to help them recognize signs of fraud. 

For example, show them what a phishing attempt looks like. These emails may come from a shady address, use poor grammar, or create a sense of urgency that just screams “red flag!” Also, teach them to exercise caution with sketchy requests, like clients asking for large refunds to a different account than they used for the initial transaction.

2. Use a Secure Payment Gateway

Whether you use a contactless payment option or an old-fashioned card reader, you absolutely need a secure payment gateway. This essential tool acts as the gatekeeper of your transactions, encrypting sensitive information and ensuring only authorized payments go through. 

GlossGenius’ Point-of-Sale (POS) hardware has built-in fraud detection in the payment gateway. With this sleek setup, you can process payments with confidence, knowing that your client’s data – and your bottom line – are secure.

3. Update Your Security

Updating your computer system and software is key to fending off those pesky fraudsters. Outdated software can leave you vulnerable to malware attacks and other threats to information security. 

It’s important to schedule routine updates and apply security patches as they come out. Think of it like a self-care routine for your tech – you wouldn’t skip a much-needed facial, and you shouldn’t skip software updates, either.

4. Use Multi-Factor Authentication 

Adding multi-factor authentication (MFA), sometimes known as two-step authentication, to your payment processing is a game-changer. Instead of relying on a password (which is easy to guess or steal), users must verify their identity through extra means, like a biometric scan or a one-time code sent via text or email.

MFA is an excellent option for businesses that let clients create personal accounts for online purchases. Say you use an online booking system where clients can sign in, make appointments, and place deposits using a saved credit card. MFA provides an extra layer of security that ensures only your fabulous clients can access their accounts.

5. Build Relationships With Clients

Building strong client relationships is a fabulous way to protect your business from payment fraud. This works two ways: First, when clients have good rapport with you, they’re far less likely to even think about pulling any shady moves. They want to keep that positive connection going just as much as you do.

Second, when clients trust you, it’s easy to have open conversations about security. While they’re in your chair, you can explain how to avoid phishing scams or how important it is to keep their payment info safe. This lets them know you prioritize their safety as much as your own. As a result, they’ll feel more confident using your services – and confidence keeps them coming back.

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Safeguard Your Self-Care Business With GlossGenius

Trust is everything in the beauty and wellness industry. Your clients have to trust that their payment information is safe with you, and you have to feel confident that your business is safe from payment fraud.

Try GlossGenius free for 14 days!

With GlossGenius, it’s never been easier to maintain that trust. Our all-in-one solution offers top-notch payment features that use PCI-compliant networks, ensuring that every transaction is secure. Plus, we constantly monitor accounts for suspicious activities – so if the worst does happen, you can catch it and fix it as soon as possible. Start your free trial with GlossGenius today.