Payment Facilitators: Beware of the Latest Scams and Fraud

Jun 20, 2019


As payment systems break down walls, providing greater access to larger pools of merchants, cybercriminals find weaknesses and seize on opportunities to infiltrate.

Since fraudsters continue to evolve and become more sophisticated, payment facilitators need to pay attention so they can protect themselves. Get to know the latest high-risk trends that payment facilitators face.

The Biggest Treats

More than 1.4 million complaints of fraud totaling $5.5 billion-plus in losses have been reported to the Federal Bureau of Investigation, according to the 2017 Internet Crime Report. These figures don’t include those scams that were never reported. Even as authorities do their bests to capture these criminals, they continue to defraud merchants and consumers via the following scams:

  • Get-Rich-Quick Schemes: Considered one of most common, recurring scams, these schemes promise an opportunity with high profits in short turnaround times. In most cases, they require upfront money and often promote themselves as easy ways to make quick money. It is not rare for these schemes to use unauthorized endorsements from celebrities or glowing, fake reviews. Any offer that seems too good to be true likely is and should be met with suspicion. These types of scams face heavy regulatory scrutiny and high risks of chargebacks from consumers.
  • Gambling or Casino Fraud: These types of businesses, which include horse racing shares, raffles, sweepstakes, and fantasy sports betting, promise consumers a chance of a prize in exchange for a payment. First, the laws for gambling vary by state, which increases a merchant’s risk of committing fraud. Some payment facilitators don’t allow gambling, but others get approved by claiming they are online games.
  • Fundraising Scams: When merchants allow other merchants’ transactions to flow through their accounts without forcing platform users to enroll with their own merchant accounts is aggregation. Businesses that engage in aggregation or fundraising may face elevated risks. To fight any type of unauthorized aggregation, payment facilitators should create and display Know Your Customer policies.
  • Subscription or Free Trial Offer Billing: Subscription-based or negative-option billing is when a person is charged for products or services if he/she fails to reject or cancel. Many of these types of merchants can exploit shoppers with misleading business models. Negative-option billing businesses subject themselves to regulatory and card scheme scrutiny and increased risk for chargebacks. Unfortunately, these schemes can be hard to detect, but some red flags include: incomplete contact information, lack of information available to customers who wish to cancel, difficult-to-read, and understand billing conditions.
  • 419 Scams: These scams, which also are referred to as non-delivery schemes, happen when merchants accept payments for products they never send or plan to ship to shoppers. Common non-delivery scams occur in high-risk industries, such as nutraceuticals and illegal items. Online auctions also are hotbeds for non-delivery schemes, especially of expensive items, like jewelry, electronics, and concert or airline tickets. Many of these go on for lengthy periods because people who make these purchases are often embarrassed or afraid of prosecution, so they won’t report it when items aren’t delivered. To avoid these schemes, payment facilitators should look for businesses that claim to sell in-demand and pricy items at dirt-cheap prices or online merchants that sell an unusually-wide variety of items. Sometimes, these can be fronts for illegal and prescription drugs.
  • Tech Support Scams: The Federal Trade Commission gets about 150,000 reports of tech support scams each year. In these cases, scammers call, email, text, or send pop-up windows falsely claiming to individuals that their computers have malware or have been infected with viruses. Scammers promise to fix a problem for a charge or offer a download that gives cybercriminals access to their computers and their personal information. At times, cybercriminals also enroll people in long-term computer maintenance plans to protect their computers from problems they never experienced. Most often, cybercriminals target older people and other demographics that may be less computer savvy. Payment facilitators should watch out for tech support businesses that have names that closely resemble large tech giants, like Google or Apple. Also, if a merchant’s site language seems aggressive, alarmist, or over-the-top, facilitators should be suspicious.

In Conclusion

Payment facilitators need to be aware of the latest trends in high-risk scams so they can protect themselves. Keeping their eyes and ears open are the best ways to protect themselves from problems and liabilities.

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Businesses that need merchant accounts should contact eMerchantBroker.com. EMB works with high-risk merchants. Its online application process is simple and easy.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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