How to Start Building a Fraud Prevention Strategy

  |   payment fraud, Sertifi

When it comes to gift-giving, no matter the occasion or holiday, it can be beneficial to have a plan in place so that you’re not feeling overwhelmed. Because let’s be honest gift giving can be stressful. Even though it might seem tediousplanning your gifthelps you stay organized, keeps you within a budget, and enables you to give something that’s meaningful to the people in your life.  


There are different ways to approach gift planning. Do you rely on gift guides to curate ideas? Do you take mental or actual notes when a person you care about makes a passing comment about something they like? Do you purchase items based solely on a budget? Do you like DIY gifts? What about tangible versus experiential versus gift cardYou get the idea. There’s no wrong way to go about it! But, planning and mapping out what your budget is, who you need to buy for, and what you want to give makes the process less daunting and more fun. 


Building a fraud prevention strategy can be approached in the same way. You need to plan and be thoughtful about it. There are different ways to build the plan, but the end goal should be the same. You want to reduce fraud and chargebacks at your hotel, property management company, or across your brand. According to Forter’s 8th Edition of their Fraud Attack Index, hotels saw a 109% increase in fraudulent activity between 2018 – 2019. Not having a fraud prevention strategy leaves you vulnerable to fraudsters so it’s good to start thinking about developing a plan. Keep reading to learn more about why hotels should have a fraud strategy, the types of payment fraud that can occur at your hotel, and the differences between them.  


The following excerpt comes from the piece How to Protect Your Hotel from Payment Fraud and Chargebacks. If you’re interested in reading more, you can download the guide.  

Why should hotels have a fraud strategy? 


Like we mentioned earlier, payment fraud has a significant impact on the hotel’s bottom line and reputation. Like data breaches, it can leave a bad taste in people’s mouths if it happens. As fraudsters continue to find ways to target hotels, it’s necessary for you to stay ahead and build upon existing plans. And if you don’t have a strategy in place, then creating one needs to be prioritized and implemented across the property, portfolio, or brand.  


These are the areas to consider when developing a payment fraud strategy.  

  • Invest in technology or features that have fraud detection. 
  • Empower your teams with knowledge and education. 
  • Create, implement, and adhere to processes and procedures. 


Keep in mind that there isn’t one product, method, or process that solves all payment fraud. You have to take a holistic and multi-layered approach to defend yourself against it. Of course, each property is different, depending on the size, budget, etc. so when developing a fraud strategy, it’s best to identify the unique qualities of your hotel and what’s realistic to implement. 

These are a handful of benefits that come from implementing a fraud strategy: 

  • Protect your guests’ information 
  • Protect your property or brand’s reputation 
  • Improve your property’s bottom line 

What types of payment fraud occur in hotels? 


There are several different types of online payment fraud that occur in hotels. These are the types of fraud that you might see at your property or across your portfolio and brand.   


Account Takeover Fraud(ATO)– This is when a fraudster obtains access to a guest’s account that doesn’t belong to them. By breaching the account, the fraudster has the ability to do any of the following: Make unauthorized purchases like booking a room using hotel points, change the guest’s PII and account information, use this account information to infiltrate other accounts, or even transfer or withdraw points. 



Card-Not-PresentFraud(CNP Fraud)This is when neither the cardholder or credit card are physically present when the fraudulent transaction takes place. It’s typically associated with online transactions. CNP Fraud could occur when making an online reservation.  




card testing fraudCard Testing FraudThis is when a fraudster uses stolen credit cards to test their validity for potential purchases. The fraudster will do this by making purchases like booking a room to determine if the card is approved. If the card is valid, then they’ll use it to make more purchases.   



Chargeback FraudChargeback FraudThis is when a person knowingly purchases a product or service and intentionally files a chargeback through the credit card company with the goal of keeping the product or service and receiving a refund. Chargeback fraud can happen on credit card authorization forms or through third-party reservations.   



Friendly FraudFriendly FraudThis is when a person unknowingly commits fraud by asking for a chargeback from their credit card company or bank after a transaction has taken place. It’s generally associated with those that don’t realize they purchased something or that they didn’t understand what they were agreeing to pay for. Friendly fraud can happen when the guest is at the hotel. 



True FraudTrue FraudThis is when a fraudster uses a stolen credit card to make an unauthorized purchase. This can occur with online booking reservations. 




You’ll notice that some of these payment fraud types have overlapping traits. True fraud, chargeback fraud, and friendly fraud have similar traits, but what distinguishes them from each other is the person’s intent and behavior. It’s also worth noting that these fraud types have different interpretations. All three could lead to chargebacks though. 


Just like gift-giving requires planning if you want to give something memorable, a thoughtful approach needs to be taken when building a fraud prevention strategy. There isn’t a wrong way to go about it. You just need to start! Keep in mind that you can’t eliminate fraud, but you can significantly reduce it with an actionable plan.  


Interested in learning how to build a fraud prevention strategy at your hotel? Watch this on-demand webinar to get some tips on how to stop transactions that may lead to chargebacks.

About the Author 

Chandra is the former Communications Manager at Sertifi where she contributed to the blog and oversaw content and branding.