Fraud Prevention

Millions of businesses and cardholders experience fraud each year. How does it happen and what can you do to prevent it?

Fraud prevention is a top priority for business owners. Advanced fraud techniques and rapid growth in fraudulent credit card activity, especially in ecommerce, make adherence to the Payment Card Industry Data Security Standard (PCI DSS) strictly enforced for businesses that accept electronic payments. There are many simple safeguards you can implement at your business to reduce your risk of fraud.

Fraud Prevention Tips for Businesses

Fraud Prevention Tips for Customers

Online fraud is extremely prevalent and can take several different forms. Common types of online store fraud are account takeover (when someone gains access to an individual’s username and password for an online account and makes unauthorized purchases with saved payment information on it) and identity theft (when a scammer impersonates someone else). Identity thieves find ways to access personal information such as social security numbers, financial data, passwords, passport numbers, birth certificates, etc., and use the information for illegal purposes like applying for credit cards and stealing social security benefits or tax refunds under false names, to name just a few examples.

Common fraud schemes come in the form of malware, or malicious software that damages or disables computer systems, “phishing” and “spoofing.” Hackers forge electronic documents pretending to represent real businesses in order to solicit payment details from individuals. Fraudulent emails can range from overpayment schemes, when a business tries to charge a large up-front cost for products or services that are never fully delivered, to charity exploitation, when a scammer solicits donations for fake organizations.

Who’s Liable for Fraud Damages?

Credit card companies assume liability for credit card fraud in most cases, and they often enforce limits on the number of purchases and total withdrawal amount from one account in a single day. Card-issuing banks monitor transactions and can temporarily freeze an account if there’s unusual activity. Travel notices, when cardholders tell their banks they will be out of town, help open the lines of communication and prevent unnecessary account freezing.

For the business, fraud liability depends on the method of payment acceptance. In keeping with the EMV liability shift set in motion by the major card brands in 2015, businesses that experience credit card fraud while using a swipe terminal to process chip cards are responsible to cover financial losses. By taking everyday precautions to mitigate fraud risk at your business, such as using an EMV chip terminal, you are protecting not only your finances, but also your reputation and credibility among customers.