In the age of card payments, almost all businesses rely on card payment methods using a card machine for business. So, it is relatable that fraud relating to a credit card also increases uncontrollably. It can be a serious headache to resolve credit card fraud, whether someone physically steals your card or virtually hacks your account.
In the event of fraud, you might incur unauthorized charges that can result in steep bills. The balance of your credit card may hurt your credit score if it increases dramatically. There are steps you can take now to prevent fraud and detect potential unauthorized uses of your card before it happens. Stay proactive and keep your accounts up to date to safeguard your credit card information from fraudsters.
How credit card frauds can take place?
Unauthorized individuals use your credit card information to make purchases with your credit card. This is called credit card fraud. Is it possible for a third party to access your sensitive information? We are listing down some common ways credit card fraud can take place.
- Stolen or lost credit cards
- By skimming credit cards, at places such as gas station
- By hacking your devices
- Fake price calls, messages, mails, or links through which a fraudster can get your card information
- By stealing your pin at checkout counters
- Hacking your mail
How credit card fraud affects businesses?
Now the question arises that how credit card fraud affects businesses. Mainly there are two types of credit card fraud which are card present Fraud and card not present fraud.
Card Present Fraud
What happens when a customer uses a stolen credit card while making a purchase in person? Merchants are not liable for fraudulent purchases if they follow all of the necessary security precautions, such as using a chip-enabled terminal. Cardholders’ issuing banks will be responsible for losses instead.
There is always the risk of card skimmers stealing customer credit card information through a merchant’s point-of-sale technology. Skimmers are devices installed at POS locations such as gas pumps and ATMs. If word gets out that a merchant’s location was the site of a card skimming incident, that can cause business to suffer and cause potential customers to lose trust in the merchant.
Card Not Present Fraud
A credit card thief makes purchases or multiple purchases from an online merchant using stolen card information. As soon as the real cardholder notices an unauthorized charge on their account, they contact the account issuer (which may be a credit card company, bank, or third party like PayPal), who reverses the transaction.
Merchants are forced to return funds to their accounts if a chargeback occurs. Consequently, the merchant loses both the product sold and its cost. Furthermore, merchants will often face fees from their own credit companies as a penalty for allowing fraudulent transactions to take place.
How to protect your small business from credit card fraud?
To eliminate 100% credit card fraud, you would have to refuse all credit card transactions, which is impossible. All types of businesses and merchants of all sizes are affected by credit card fraud, which costs them not only money but also time and credibility. The good news is that you can minimize the risk of your business falling victim to credit card fraud.
Make sure you have an EMV chip card reader
EMV chip readers are mandatory for most businesses, but not all. Even though gas stations are required to have EMV card payment machines inside, they can put off this requirement for years. Regardless of whether your industry requires it, protect your business from credit card fraud by getting one anyway.
SCA (Strong Customer Authentication)
Strong Customer Authentication (SCA) has been implemented by some UK payment service providers, so if you can find one that offers it, take advantage of it.
Strong Customer Authentication is even incorporated into the EMV readers. For SCA, merchants must verify a credit card purchase using two out of three components. The customer must show what they have, what they know, and what they “are.”
- Mobile phones and debit cards are examples of things you have.
- Passwords and PINs are something you know.
- The biometrics you possess, such as your fingerprints or facial recognition, are part of what makes you who you are.
Online CVV2 codes
CVV2 codes (the 3-digit code on the back of your credit card) are not used by many online merchants. This code is an additional security measure to prevent merchants from accepting credit card numbers stolen in data breaches.
Dynamic CVV2 codes are recommended
To prevent CVV2 codes from being stolen, Visa has begun generating a dynamic CVV2 (dCVV2). The mobile Visa app allows cardholders to request a dCVV2 code whenever they want to buy something online and use it like their regular security code. Visa’s system crosses-checks the dCVV2 and approves it before discarding it since it is tied to the cardholder’s card number.
Make sure you have cybersecurity insurance
Get cybersecurity insurance as soon as possible if you don’t already have it. If fraudsters breach your servers and steal the personally identifiable information of your customers, your regular business insurance won’t protect you.
The law requires you to notify every individual whose data has been stolen and provide them with one free year of credit monitoring services if that happens to you. Your cyber insurance company will cover your losses in the event of fraud.
Fraudulent chargebacks should be avoided
A chargeback is one of the most common types of credit card fraud your business faces. The purpose of chargebacks is to protect customers from merchants who refuse to refund damaged or incomplete orders. Chargebacks are automatically refunded by credit card networks when the customer requests one. Research and know your chargeback rights as a merchant. There’s no need to accept every chargeback that comes your way. It is possible to fight chargebacks and win.
Require the return of damaged items
Customers reporting damaged or stolen shipments is one method of chargeback fraud. It is common for most merchants to give them a replacement automatically when they ask for one. Yet the damaged shipment hadn’t been damaged at all, and the lost item hadn’t been lost at all (unless it had been taken by porch pirates).
Fraudsters hope you will be so busy that shipping out a replacement won’t be a hassle. Since the first product was not damaged, they will receive two products. Send your customer a prepaid return label and ask them to return the damaged item before you ship out a replacement to prevent damaged item fraud. You won’t need to send out the replacement if the customer doesn’t return the item.