Along with exploring small business loans, have you been considering adding an ecommerce component to your small business? This is a smart move! A new Forrester Research report indicates that by the year 2020, online sales in the US will reach $523 billion – a growth rate of nearly 10%. What’s driving this rapid increase in online sales? Two factors: the use of mobile phones by consumers to conduct product research before heading for brick and mortar stores, and the increased ease of shopping online due to free delivery programs and generous discounts.
CREDIT CARD FRAUD IS A BIG, COSTLY PROBLEM IN THE US
But what’s often an afterthought of shopping online is the problem of credit card fraud. In the past six years, consumers have suffered losses of $112 billion stemming from identity theft and credit card fraud the Insurance Information Institute reports. Most people assume that credit card fraud comes from criminals that intercept credit card information during transactions, but the real threat comes from new accounts whereby consumer personal information is used to open up new credit card accounts to make purchases. The Federal Trade Commission keeps track of complaints related to identity theft, and they rank 2nd right behind government and public benefits fraud.
15 WAYS TO STOP SMALL BUSINESS CREDIT CARD FRAUD
As a small business, it’s worth the risk to provide an online shopping option for your customers, provided you take steps to protect their information and have a secure process for managing credit. Studies have shown that credit cards will continue to be one of the most popular ways for consumers to shop online. With this in mind, we’ve put together a list of ways you can prevent credit card fraud for your small business.
#1. INCLUDE THE HIGHEST LEVEL OF SECURITY ON YOUR WEBSITE.
When setting up your online shopping portal, ensure that you are using the highest allowable security network possible. Use an e-commerce website that’s built on a server that is constantly monitored and updated with the latest security patches.
#2. HAVE AN AUTHENTICATION SYSTEM IN PLACE.
All credit card transactions should be authenticated, based on user information and credit card information. A merchant account can process all credit cards securely, matching consumer information against the credit card data.
#3. VERIFY CONSUMER INFORMATION OVER THE PHONE.
If in doubt, ask customers to call in to place credit card orders. This can allow your security team to ask a series of security questions before accepting credit cards as payment.
#4. INVEST IN CYBER SECURITY INSURANCE.
Merchants are often on the receiving end of credit card fraud, therefore it pays to invest in cyber security insurance to protect your small business.
#5. CHOOSE A REPUTABLE MERCHANT ACCOUNT VENDOR.
A good merchant account vendor will give you peace of mind when processing online payments from customers. Choose one with a track record of cracking down on credit card fraud and participating in small business loan programs.
#6. PROMPT CUSTOMERS TO SET UP ACCOUNTS.
During the checkout process, require all online shoppers to set up customer accounts that include their name, address, phone number, and email. This is not only good for customer service reasons, but it’s helpful if there is any problem with the credit card.
#7. UPDATE POINT OF SALE SYSTEMS.
If you accept credit card payments at your brick and mortar store, make sure all point of sale systems are secure too. Routinely update them with the help of a local POS technician.
#8. CONDUCT BACKGROUND CHECKS ON ALL EMPLOYEES.
Many cases of credit card fraud can be prevented simply by using caution when hiring employees. All should be screened and criminal background checks conducted to ensure the safety of consumer information.
#9. USE AN ADDRESS VERIFICATION SYSTEM.
Credit card fraud often involves buying items and shopping them to other addresses, therefore a system of gathering both billing and shopping addresses can reduce this problem. Fraudsters are likely not to have the victim’s billing information.
#10. INSIST ON GATHERING CREDIT CARD SECURITY NUMBERS.
Those three little numbers on the back of credit cards are valuable in cracking down on credit card theft. Insist on them when gathering complete credit card information.
#11. CHECK BANK IDENTIFICATION NUMBERS.
Many consumers do not realize that the first several digits of a credit card number indicate the issue bank and country of origin. Flag credit cards that don’t match up with this data.
#12. MAINTAIN HISTORICAL FILES ON CHARGEBACKS.
A big problem for small businesses that accept credit card payments is chargebacks, whereby consumers get the goods and then file a complaint to get money back. If a customer does this more than once, it’s ok to block them from making future credit card purchases.
#13. WATCH FOR PATTERNS IN BUYER BEHAVIOR.
So too, it’s important to track buyer behaviors for suspicious actions. For example, it’s unlikely that an 80 year old woman will want to purchase ski equipment meant for a 20 year old man. Get consumers on the phone to verify odd purchases.
#14. VERIFY IP ADDRESS MATCHES.
Another way to cut down on credit card fraud is to insist on gathering all IP addresses when processing card payments. Use this information to identify if the buyer is blacking this information, in which case you can refuse the payment.
#15. BLOCK HIGH RISK COUNTRY PURCHASES.
Certain countries are on blocked lists for e-commerce purchases because if the high incidents of credit card fraud and other identify theft. Make sure your merchant credit card processor has this built into your system to protect your business.
Remember, credit card fraud is everybody’s business. Educate your employees and your customers about ways to prevent and report suspected credit card or other information hampering. When small businesses expand to online sales, they must think like bigger companies by having added security measures in place.