How can I protect my business from fraudulent transactions?

For any online or brick-and-mortar merchant, “fraud” is one of the ugliest words that can be uttered. Fraudulent transactions can completely disrupt a business, leading to substantial cash losses, restricted or closed merchant accounts, lost customers and a severely tarnished reputation.

Sad to say, but fraudsters are everywhere. Nevertheless, merchants have a number of tools at their disposal to greatly reduce the risk of fraud. Here are fraud protection steps every business should take:

  • For any CNP (card-not-present) transaction, use address verification (AVS) and card code verification (CCV). This helps to confirm that the person making the purchase is actually the cardholder.
  • Be vigilant about spotting and examining orders that look out of the ordinary. These might be unusually large orders, unusually large orders from new customers, large rush orders, orders placed without all the credit card information you are requesting, orders where the ship-to and bill-to addresses are different and orders being shipped outside the U.S.
  • For in-store purchases, be on the lookout for people who take their credit cards out of their pockets rather than a purse or wallet, people rushing you to place a big order just as you’re closing, people who tell you their credit card is damaged and won’t scan and people who give you their mobile phone claiming the bank is on the line to verify the card. These are all signs of a scam.
  • Educate your entire staff on what to look for in term of suspicious in-store behavior and suspicious online orders. You can’t be everywhere, but well-trained employees can save the day.
  • For in-store purchases, EMV chip cards are the best defense against skimming — that is, fraudsters using devices to steal data from magnetic card strips.
  • Make sure your payment processor is PCI-compliant and uses tokenization — methods and practices involved in accepting, transmitting and storing cardholder data.
  • Conduct regular audits of your shopping cart software and payment processing system(s) to make sure you are using up-to-date technology and following data security best practices, and are free of malware.
  • Merchant account providers offer various levels of anti-fraud tools. If your business is especially vulnerable, consider upgrading from the basic tools to higher levels of security by implementing features such as chargeback guarantees, account takeover protection, auto-decline of unusual orders and even manual review of suspicious orders.
  • Stay up-to-date on new scams fraudsters are running and what you can do to thwart them. Scams go in and out of vogue, and new schemes are being attempted at all times. Our merchant account processing partners and issuing banks are on top of these developments, as you might expect, and are always eager to help you protect your business. Use them as a resource for education as well as for evaluating anti-fraud features to supplement your merchant account.

Clearly, staying ahead of the curve on fraud is the best prevention. If you wait for disaster to strike, it may be too late. If you’re not sure what level of fraud prevention you need with your payment processing solution or believe your current practices may be out of date, contact us now.

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