According to a KPMG report, Malaysians have lost about RM415 million to scammers in the first seven months of 2022. Bank Negara has issued a strict directive requiring all Malaysian banks to stop using SMS-based authentication for online banking services.

As an online business, not implementing fraud prevention measures can impact your sales as high online fraud rates can make customers wary of purchasing from you. Customers may become skeptical about sharing their personal and card details, leading to a decrease in sales and conversion rates. We have compiled 3 ways to prevent fraud, specifically for merchants operating in Malaysia. Before diving into the details, let’s first explore how fraud can happen in the first place.

What causes online fraud?

Online fraud has become increasingly widespread, primarily due to the rise in online purchases. The rapid growth of e-commerce, reaching MYR38.2 billion in market value in 2022, has increased opportunities for fraudsters to target inexperienced businesses and users.

Unlike traditional scams that rely on customer input, online fraud can occur without the knowledge or involvement of merchants and customers. Fraudsters exploit vulnerabilities in e-commerce platforms to intercept commercial transactions and obtain money from either customer, the business, or both parties involved. This will damage not only your finances but also your reputation - and leads to legal issues. That’s why most businesses decide to partner with a third party like a payment gateway to keep sensitive data such as card details in a safe environment. To learn more, check out our merchant-friendly guide on payment gateway.

4 types of common fraud in the market

In e-commerce, it is crucial to be aware of the common types of fraud that can potentially impact your business. These include:

1. Payment fraud: Fraudsters make unauthorized transactions

2. Credit card fraud: Fraudsters acquire users’ credit/debit card information for money

3. Chargeback fraud: Fraudsters falsely claim an unsuccessful payment

4. Data breach: Sensitive data of customers and retailers get leaked

Factors that contribute to fraud

Fraud in Malaysia is influenced by two factors

Anonymity

In Malaysia, the prevalence of internet access allows fraudsters to exploit the ease of adopting fake identities and utilizing anonymous IP addresses. This anonymity empowers them to engage in illegal activities, such as fraudulent transactions, with increased confidence. Without essential tools to identify identity, cybercriminals can easily exploit your business without leaving a trace behind.

Low-security level

As fraudsters continually adapt and improve their techniques, staying ahead of technological advancements is a must for any online business. Without regular updates to security measures like data encryption, robust password policies, and multi-factor authentication, businesses that have integrated with a traditional payment gateway may become more vulnerable to fraud.

This is why many Malaysian businesses are shifting toward a more modern solution. If you’re unfamiliar with the differences between the two, check out 3 reasons why it is recommended that merchants switch to a modern payment gateway.

3 ways to prevent fraud that you need to know

In Malaysia, e-commerce is facing serious threats of fraud with total losses amounting to MYR 57.73 million in 2021. Merchants must take proactive steps to combat online fraud.

Operating without a secure checkout exposes you to risks like financial losses, reputation damage, and legal issues. Hence, it is crucial to implement robust fraud prevention strategies to ensure the security of transactions and protect your finances and reputation.

Here are our recommendations on ways to protect your business:

1. Use Address Verification System (AVS)

To avoid anonymity, many online businesses implement an Address Verification System. AVS is a tool that verifies the customer’s billing address during checkout by comparing it with the address associated with the card.

By cross-checking this information, AVS can detect any inconsistencies or mismatches, which may indicate potential fraudulent activity. This way, you can safeguard your operations by effectively mitigating the risks of fraudulent orders.

Notably, case studies have demonstrated that AVS can detect and prevent 89% of fraudulent transactions, highlighting the effectiveness of AVS in identifying and blocking fraudulent activity. This role of the verification process adds an extra layer of security to the payment process, helping online merchants protect themselves and their customers from fraud.

2. Employ Fraud Detection Tools

To strengthen your business’s defense against fraud, another solution is to integrate fraud detection tools, which employ cutting-edge technologies like machine learning and artificial intelligence. These tools analyze crucial data points such as IP addresses, transaction behavior, device information, and historical patterns to flag potentially fraudulent activities.

3. Implement a secure payment gateway

Last but not least, a crucial step for online businesses to prevent fraud is to implement a trusted and secure payment gateway. By utilizing payment gateways with advanced fraud detection and prevention tools, you can protect your business and customers.

Additionally, storing sensitive customer information endangers you of data breaches, potentially leading to government fines. No business wants to risk its brand reputation and customers’ trust by keeping sensitive information. That is why many trust this responsibility to a secure payment gateway.

Having a secure payment gateway is crucial for protecting your business from fraud. Here are the key features that contribute to its effectiveness:

• Data encryption and tokenization: Customers’ sensitive data is encrypted and transformed into unique codes (tokens), ensuring a double layer of protection

• Two-factor authentication: Implementing this security measure helps verify the identity of customers, reducing the risk of unauthorized transactions

• PCI-DSS compliance: Adhering to the Payment Card Industry Data Security Standard, ensures that your business meets strict security requirements for processing online payments. Check out our article on why every online business needs to be PCI-compliant.

If you want to learn more, take a look at our ultimate guide for Malaysian businesses on how to choose a payment gateway.

Why Opn Payments?

Opn Payments is the trusted choice for safeguarding online businesses in Malaysia from fraud. We prioritize security by offering a PCI-compliant solution with advanced data encryption and tokenization capabilities.

Opn Payments provides businesses with a secure platform for conducting transactions, ensuring the confidentiality and protection of your customers’ sensitive data.

Trusted by over 22,000 businesses across Asia and the U.S, our payment gateway offers a seamless payment experience. With Opn Payments, businesses can enjoy hassle-free setups, no maintenance fees, and uninterrupted service uptime of 99.99%, even during peak hours.

When it comes to securing online payments and preventing fraud, Opn Payments is the trusted choice for businesses in Malaysia, ensuring peace of mind and a secure payment environment.

Opn has a local sales team based in Kuala Lumpur and is available to answer any questions you may have. Contact us today to get the support you need in choosing the proper fraud prevention for your business.