Credit card fraud and costly chargebacks can cripple a small business. If you don’t take all the appropriate measures recommended by processors and credit card providers. While fraud is nearly always intentional, the majority of non-fraudulent chargebacks are also impacted by how your small business represents itself, and the actions you take leading up to, and after a customer complaint is made.
With the rise of online shopping and mobile payment processing, your business needs to protect itself now more than ever. Pivotal Payments, a payment processing and merchant services provider, shares these tips for small business owners to use for combating credit card frauds and fraudulent chargebacks.
1. Card-present purchases
The majority of credit card fraud these days happens when the customer isn’t present at your business with their card in hand. For example, online or over the phone. With a card-present situation, the best deterrent is clearly displayed signs stating all transactions are being recorded at the register, and will be readily turned over to law enforcement on request.
This won’t stop all in-person fraud, but since both Mastercard and Visa state you must process their credit cards whether the customer presents ID or not, this is about all the deterrent you can offer, other than making assumptions about people’s character and turning them away at the counter.
2. Over the phone
Unless online payments are made through a secured gateway that collects IP information, ISP, and consumer location data, all anyone who’s making a purchase needs is the credit card number itself — no CVV or PIN. This is an open door for credit card theft, both online or when making purchases over the phone (Ie., you’re not allowed to ask for a CVV ever, unless using a verified online gateway).
Any time you can require the customer to pay in person, using their card and pin number on a terminal, the better protected you’ll be against credit card fraud and the chargebacks that typically follow. Restaurants, particularly the fast food variety, too often take payments over the phone when they could just as easily have the customer pay when they pick up their food, or when it’s delivered.
3. Payment descriptor
When a customer pays a bill using their credit card to “Bill’s Plumbing”, they won’t expect to see “William’s Multitrade” as the payee descriptor on their credit card statement. This can lead to lengthy disputes and unnecessary chargebacks that are basically entirely your fault.
If your business structure is complicated and the storefront bears a different name than the entity that receives your payments, make it abundantly clear in your online shopping cart, or have it printed boldly on the paper receipts you give out to customers. Fact is, most times they won’t even remember the purchase and a name that doesn’t spark that memory is likely to lead to lost profits on your end.
4. Latest and greatest
Online purchases need to be facilitated through gateways that don’t take ANY chances when it comes to fraud prevention and security. This is why many small businesses prefer to sell their products through sites like Amazon, Ebay, and Shopify. Regardless, processing credit card payments entirely through your own gateway is a bad idea.
Making use of the latest and greatest technology takes data security out of your hands, and puts it into big gateways that can afford to employ the best and brightest out there. If you have physical terminals, always go with the highest rated solution and ensure PCI and EMV compliance, along with data tokenization, are all technologies included in the service.
5. Don’t make exceptions
A big exception that many small businesses will make to commonly accepted credit card processing rules is when it comes to billing and delivery addresses. There’s a reason why we see so many Ebay and private ecommerce sellers state that they’ll only mail to PayPal verified addresses. It’s because they don’t want to deal with the credit card fraud or loss of goods they’ll experience if you’re dishonest with them.
Only you can decide what’s right for you, but it’s a good practice to put up fraud and chargeback roadblocks when it comes to customers who want to do things differently than the majority. For instance, in the billing/mailing address issue, require ID and a signature before delivery can be completed. Being too nice and flexible when real money and your merchant account is on the line, is where the term “nice guys finish last” came from!
6. Customer service
Chargebacks can be fraudulent; where the customer receives an item and attempts to get it for free (or try to get another) with a chargeback or threat of one. Chargebacks are also the byproduct of an unauthorized user buying something from you with another person’s card.
Many other chargebacks occur because of false promises, poor quality, and terrible customer service. Poor service will quickly lead to a chargeback. If you make a promise that isn’t honored, or deliver a sub-par product, good service can still prevent a chargeback by “making it right” for the customer. Lack of service leads to chargebacks because the customer has no other options.
Closing
Follow the suggestions set out above, stay on top of all emerging fraud trends, and only use the most secure and up-to-date payment gateways, and fraud is much less of a possibility for your small business.
