Credit card fraud is an ever-present danger for small businesses all around the world. In fact, the Nilson Report estimated that global credit card losses due to fraud reached $27.85 billion in 2018, a 16.2% increase from 2017. Credit card fraud can result in significant financial and reputational damage for your business, as well as financial damage for your customers, making it crucial that you know how to prevent credit card fraud as a merchant.
Impact of Credit Card Fraud
Credit card fraud is one of the worst things that can happen to a business. When someone commits credit card fraud, they use someone else’s credit card to purchase goods or services without the permission of the cardholder. This type of theft harms not only the cardholder but also the business where it was used.
When a company or individual discovers credit card fraud, a cardholder may still lose part of the money that the thief spent. Additionally, the business that accepted the credit card can lose the money given to them through the fraudulent credit card. To add insult to injury, companies may have to pay chargeback fees. These fees will come from the credit card company that issues the card, with the fees accounting for what the credit company charges merchants for returning transactions.
Credit card fraud doesn’t only come from those who have stolen a credit card. It can actually come from the cardholder themselves. When a cardholder commits friendly fraud, they purchase something with their card and then claim they didn’t make that purchase themselves. If they pull this off, they may get the product for free, and your company may end up essentially giving away a product without making any money off of it.
The Federal Trade Commission reported that, in 2016 alone, there were 399,225 cases of identity theft reported in the United States, with 33% of those instances related to credit card fraud. With so many people and businesses impacted by credit card fraud, you need to do all that you can to prevent the extra costs and responsibilities that come whenever credit card fraud occurs.
Steps to Preventing Business CC Fraud
Since your business can’t just stop accepting credit cards to avoid fraud, you need to take steps to prevent credit card fraud from occurring and manage it properly when you discover fraud. Wondering how you can prevent cc fraud at your business? The four tips listed below can help.
1. Accept Cards that Use EMV Chips
One of the best ways to prevent fraud at stores or restaurants is to ensure that your store accepts EMV chip cards. As EMV is the worldwide standard for chip-based credit and debit card transactions, it’s critical for your company to implement it.
The United States has been slow to accept EMV, which many experts agree is a major reason fraud in the U.S. remains so high. Accepting EMV chip cards will lead to increased business safety, less liability, more consistent user experience and improved security for your customers’ data. To encourage EMV chip use, train your staff to ask consumers to insert their chip rather than swipe.
2. Run Regular Reports
To avoid credit card fraud, you should make running in-depth reports a regular part of your schedule. With a program that tracks payments and lets you analyze them, you can quickly run daily audits that can show you if there is any suspicious activity occurring. In-depth reports let users analyze individual transactions rather than the normal batch balance that you might be used to seeing.
As you can see individual transactions in these reports, you’ll be able to spot red flags with ease, stopping credit card fraud before it even begins. For example, daily reports make it easy to see if your employees are paying themselves unauthorized tips or other forms of fraud.
3. Train Staff
Even the best payment processing systems can’t prevent all of the fraud in the world. User error is always a threat to the complete prevention of credit card fraud. To reduce staff error and make staff more confident when handling cases of fraud, you should train employees to follow the proper procedures every time they accept credit cards from customers. Among other business-specific procedures, your training should prepare staff to:
- Check a customer’s ID to make sure that the name on the ID matches the one on the credit card. If the names don’t match, its acceptable for the merchant to not accept payment via the card.
- Look for tampering and damage done to the card, as these qualities indicate that the card could have been stolen.
- Use an Address Verification Service to cross-reference the cardholder’s billing address with the address provided to the card issuer. If it doesn’t match, the employee should be trained to know to deny service.
- Examine the receipt versus the credit card. If your staff have concerns about the credit card, they can check the receipt to see if it has different information than what appears on the card. Staff can check to see that the cardholder’s name, the signature on the card and the final four digits on the account number match the receipt.
4. Delivery Confirmation
A simple way you can prevent friendly fraud is to implement delivery confirmation systems throughout your business. This way, whenever someone tries to claim that they didn’t purchase the product, you can come right back with the delivery confirmation that shows it was delivered to their residence. With the proof that the package was delivered to their home, the fraudsters claim that they didn’t order the product or that they never received it will fall flat.
Maintaining Your Business’s Reputation
One of the most significant benefits of implementing steps against credit card fraud is its ability to help you maintain a strong business reputation in your community. If you are constantly running into credit card fraud, consumers may be wary of spending money in your store. Additionally, other businesses or potential partners may not want to work with your business if you’re constantly running into fraud issues. Credit card fraud can harm your company’s financial stability and make you appear less professional.
If you’ve had issues with protecting customers’ data, especially during payment processing, people are going to be less likely to use your service. They don’t want their data stolen after they make a purchase, and if your company has a track record of not putting enough safeguards up, they’ll look elsewhere. The potential hit to their reputation is one of the biggest reasons companies invest in a secure payment processing system.
Choose Velocity Merchant Services for Secure Payment Processing
One of the best ways you can prevent credit card fraud and data loss is to have a secure payment processing system. Velocity Merchant Services (VMS) is dedicated to giving small business owners more power through the many business and card processing solutions we offer. When working with VMS, you’ll receive solutions that ensure your electronic payment processing is affordable, easy-to-use and, most importantly, safe.
Schedule an appointment today to speak with one of our representatives about how we can help you prevent credit card fraud at your business.