Today it’s impossible to run a business without accepting credit cards. But with the constant reports of wide-spread credit card fraud, it’s critical for every company owner to understand and know how to prevent fraudulent uses of credit cards.
Fraudulent credit card use is damaging to businesses and consumers alike. As fraud reports become more common, there are specific ways you need to protect yourself and your customers from fraud and identity theft.
Here, we’ll look at the key ways you can keep fraud from infiltrating your business.
Accept Chip Cards to Prevent Credit Card Fraud
The worldwide standard for credit and debit transactions that are chip-based is EMV. They work hard to fight against the fraudulent use of cards.
Many industry experts have concluded that the United States suffers from a higher fraud rate than other parts of the world. This is because we’ve been slower to adopt the EMV standards.
Nations that have employed EMV earlier on have experienced a drastic decrease in fraud reports. In the United Kingdom, for example, fraud cases decreased by 70% from 2005 – 2013.
When you start accepting chip cards with the EMV standard, you become a part of the worldwide anti-fraud battle. In addition, you:
- Avoid potential liability
- Protect the data of your valuable customers
- Keep your business much safer
- Help create a consistent experience for buyers
All of these are great reasons to start accepting only EMV chip cards.
Watching For Potential Warning Signs
When you’re accepting transactions that are card-present, pay close attention to any warning signs that the buyer isn’t the same person as the cardholder. There are several signs that might indicate that the customer is attempting fraud:
- The customer pulls their card out of their pocket instead of a purse or wallet
- The purchase is for an unusual amount of very costly items
- The purchase has a strange variety of items or a wide value variety
- The customer is trying to make a purchase at closing time and wants to rush you
- The customer doesn’t want to insert the chip or swipe the card, but insists that you process the transaction manually
- The customer hands you their phone, claiming that a representative from their bank is on the line with an approval code
Not all customers who perform these actions are trying to be fraudulent. Always trust your instincts and use common sense. However, if a customer displays one or more of these behaviors, it’s a good idea to consider making a report on the potential of fraudulent activity.
Preventing Card-Not-Present Fraud
Accepting EMV chip-card payments drastically helps to reduce fraud in-person. But what about card-not-present fraud? The fact of the matter is that 45% of fraudulent credit card cases happen during card-not-present transactions.
This means that you need to take additional precautions when you accept payments online or over the phone. Even if you can’t physically see the buyer, there are several warning signs to look for that can indicate fraudulent card-not-present uses:
- An order that has many of the same item, especially if buying multiples of an item is highly rare
- Orders that have several high-value items that have a lot of value for resale
- Overnight or rush orders
- Purchases that fail CID (the three-digit number on the credit card’s reverse side) or fail AVS (Address Verification Service)
- International orders from places you don’t market or for products that could easily be purchased in a person’s home country
- Several purchases for the same customer on the same day
- Several purchases from identical IP addresses
- Muliple orders shipped to one address but purchased using different credit cards
- Several purchases on a single card with one billing address by several shipping addresses
- Multiple purchase failures prior to eventual authentication
Always remain vigilant about the potential for online or over-the-phone fraud. This happens almost just as often as in-person fraud attempts.
Create a Fraud Protection Procedure
Create a procedure for yourself and employees to follow when accepting credit or debit card payments. By having a set procedure in place, you make a habit of combatting fraud before it happens.
Your procedure should include:
- Checking and verifying the customer’s ID every time they perform a purchase with a card
- Check the credit card itself to make sure it hasn’t been tampered with or damaged
- Use an AVS (Address Verification Service) to confirm that the billing address matches the card being used
- Take a look at the purchase receipt and review the information against what’s on the card
Once these steps are in place, you’ll eliminate a high percentage of fraud cases.
Report Cases of Fraud As They Happen
No matter how careful you are, there’s still a possibility that you’ll become a fraud victim. When you, your customers or workers think you might be victims, you need to act right away:
- Phone the card’s authorization center. Inform them that you currently have a “code 10 authorization request”
- Don’t alarm the customer who presents the card. Remain calm and remember that your job is keeping yourself and your workers safe
- Hold onto the card so that you can address questions from the card issuer
- Reply to the card issuer’s questions in a calm tone. Use yes and no answers and follow the detailed instructions they’ll provide you
- Avoid the temptation to apprehend or confront the customer. This is for your safety and the safety of those around you
- When needed, the card issuer will contact your local police while you hold on the line
If you notice after-the-fact that there has been fraudulent use of a card, the following places will be able to help you:
- The company that processes your card transactions
- Your bank
- Local authorities
- Legal counsel
It’s very important that you move quickly. The fraud could be a larger issue related to identity theft.
Fraudulent use of credit cards is a constantly moving goal post. Criminals get smarter and their technology continues to advance.
Because of this, the best thing to do is to continue your education about fraud and how you can prevent it. Your customers will thank you.