The process of navigating the financial aspect of your small business can be a difficult one. Some small businesses shy away from accepting credit cards as a form of payment. But, in today’s business world, it is a necessity for success. So, how can you be sure that your business isn’t a victim of credit card fraud and how can you keep your customers protected as well?
Credit card fraud is an increasingly common occurrence today. The Federal Reserve reports that fraud accounts are responsible for more than 50% of disputed credit card cases. What does this mean for your business? Chargebacks that mean your customer gets their money back and your products or services aren’t necessarily returned. So, how can you avoid this? And what ways can you protect yourself and your customers from credit card fraud?
What Does Credit Card Fraud Mean for Your Business?
The rough reality of credit card fraud is that it generally means lost revenue for your business. When a customer calls their credit card company to dispute a charge, you have the right to dispute the claim. The difficult lies in your business’ ability to prove that the claim was valid. How can you prove a valid signature with so many charges being made online and so few businesses checking additional identification when customers make purchases?
When you can’t provide proof of signature with a credit card charge, your business takes the hit. The majority of credit card disputes work in favor of the customer. So, your account is debited when an improper charge is reported. This can lead to unnecessary lost revenue for your business year after year. How do you prevent that?
The good news for small businesses is that there are ways to protect yourself against credit card fraud in the first place. Let’s take a closer look at ways to identify fraudulent credit card use and the best methods of prevention for your business.
1. Always confirm identification when customers sign.
When customers make a purchase in person, compare the cardholder’s signature on the back of their card with the signature at time of purchase. If a signature panel is blank, or you cannot make out a signature, ask the cardholder for another means of identification. If signatures don’t match, ask for another form of payment.
While some customers might get annoyed at this request, most will appreciate the fact that you are protecting your customers. If the cardholder refuses to give you another form of identification, ask for another form of payment. When you implement a policy of signature comparison or another form of identification, you will see your losses drop substantially over time.
2. Implement credit card chip usage.
Chip-enabled credit cards are a better means of transaction processing than the traditional swipe method. In fact, most businesses have already updated their terminals to accept chip-enabled credit cards. Chip technology has been an effective means of credit card fraud prevention for customers and businesses.
New industry standards are actually moving to ensure businesses comply with SHA-2 payment terminals. This newest technology provides the latest encryption, better reading, more effective communication, and a higher level of security for both businesses and their customers.
3. Stick to exact amount charges.
Too often, businesses fall victim to credit card fraud when an original transaction doesn’t go through. When customers ask the business professional to charge a smaller amount, the deviation sends a red flag to credit card companies. If a customer turns around and disputes that transaction, the deviation from the original amount make it’s a challenge for businesses to dispute the transaction.
4. Invest in identification verification services.
Online shopping is the new rave for consumers. This is an easy way for scammers to make fraudulent charges. Verification can be done to a certain degree when it comes to online purchases. The good thing about online purchases is that you can invest in identification verification services to protect your business and your customers.
Small businesses can invest in anti-fraud resources like Verified by Visa and Mastercard SecureCode to verify online purchases. They use address verification, and even frequent cell phone purchase use to let you know if purchases are legitimate. They will even red flag purchases that seem suspicious.
5. Train your employees to be observant during transactions.
Sometimes, it is easy to tell if a customer is making a purchase with a fraudulent credit card. Watch their body language. Do they seem nervous? Are they rushing the process? Sometimes all it takes is a gut instinct to alert you to a fraud in progress. You should also have customers keep an eye out for large purchases. You may want to set a policy that requires a second form of identification for purchases over a certain dollar amount.
Credit card fraud is a common way businesses lose revenue today. When you set credit card fraud prevention methods in place, and learn ways to identify possible fraudulent charges, your business will greatly benefit. Because it is increasingly difficult to dispute fraudulent credit card charges, the best way for businesses to fight fraud is to prevent it before it even happens. Your business won’t be the only one to benefit from these prevention methods. Your customers will thank you, too!