Chilling fact: In 2021, worldwide payment card fraud losses exceeded $32 billion, according to the 2022 Nilson Annual Report on Fraud Statistics.
That’s a 14% uptick from 2020, with criminals netting nearly $4 billion more in 2021 than in 2020.
Today, more than ever, credit card fraud poses severe and often devastating threats to businesses.
Yet, at the same time, business fraud detection tools have become more advanced and prevalent.
While there’s no clear answer to this puzzling contradiction, research shows that small and medium-sized businesses (SMBs) are especially vulnerable to these attacks, primarily because they lack awareness (or denial!) of the inherent risks of accepting payment from customers.
Other SMBs may be aware of the dangers but don’t know where to begin in mitigating these risks.
In this article, we’ll guide you through essential credit card mitigation practices to ensure your company’s financial security and safeguard its reputation.
The Vulnerabilities Subjecting SMBs to Credit Card Fraud and Its Costs
Several reasons might explain why SMBs tend to be more vulnerable to credit card fraud, with the most common being limited resources for investing in robust cybersecurity measures and fraud detection tools.
For a business that has to choose between hiring additional personnel to fill orders or investing in updated cybersecurity measures, it can be like juggling flaming torches.
You feel destined to get burned either way.
But a gradual approach is better than doing nothing (and doing nothing is the most dangerous option). Here are a few problems and the actions you can take to get started on improving your fraud detection measures:
Employee lack of awareness about threats. This common but dangerous problem can be resolved quickly through training. Once your employees understand the risks and how fraudsters work, they’ll know what to watch for and how to mitigate them. This should be your first line of defense if your budget is limited at the beginning of this process.
Limited payment processing options due to budget constraints. When money is tight, SMBs struggle to decide where to invest in improvements and what can wait. But security is NOT the place to cut corners—and doing so could cost you more in the long run. Fraud detection tools, PCI compliance, tokenization, and robust encryption standards are vital to averting risk and creating a robust security strategy.
The need for quick transaction approvals. Balancing speed and security is challenging. Checkout delays can lead to cart abandonment and lower conversion rates, whereas a fast, seamless experience keeps customers coming back.
However, integrating efficient and secure fraud detection enables fast approvals without sacrificing security.
One payment processing feature that many SMBs are embracing enables customizable settings that allow you to adjust the level of scrutiny for different types of transactions.
Without solid security measures in place, you risk:
Chargebacks and fines
Lost time from staff trying to identify fraud
Negative impact on EBIT
Reputational damage and loss of customer trust from data breaches
Best Practices for Protecting Your Business
It IS possible to offer a seamless and secure payment experience that fosters customer trust and loyalty while contributing to your company's long-term success.
Taking the time to plan and develop the right strategy is worth the effort.
The best practices below will set you on the path to success.
Never Store Full Cardholder Data. Would you be comfortable knowing that a company you do business with maintains your full credit card information in their system? The answer should be a resounding NO!
Don’t be THAT company.
A data breach could leak sensitive information, with repercussions including financial losses from fraudulent charges, legal consequences, and fines for inadequately protecting customer data, not to mention the loss of customer trust.
There are three essential ways for businesses to prevent unauthorized access to customer data:
Tokenization protects sensitive credit card data by replacing it with a secure code.
Encryption involves scrambling data to render it unreadable without a key.
Implement strong authentication, including multi-factor authentication (MFA).
A robust fraud mitigation strategy should include one or more of the above, in addition to a secure data handling protocol.
For example, only authorized personnel with a legitimate need should be able to access specific data sets.
Enhanced Fraud Detection and Prevention. Other techniques use advanced analytics and artificial intelligence (AI) to aid in fast detection and resolution of suspicious activity:
Multi-factor authentication is a method you’re likely familiar with. It requires the account holder to provide at least two verification methods—such as a code sent to their phone or a fingerprint scan—before they can access their account.
AVS (Address Verification Services) and CVV (Card Verification Value) checks are similar to multi-factor authentication but for credit card transactions. AVS validates the billing address, and CVV ensures the physical card is present for online purchases.
Velocity checks and geolocation analysis provide additional layers of security to prevent carding attacks. Velocity checks analyze the frequency and amount of transactions, while geolocation analysis compares the geographic location of a purchase to the customer’s billing address.
Real-Time Visibility. Proactive and diligent real-time monitoring of transactions for suspicious activity is essential to protecting your business and your clients.
For companies in the Microsoft Dynamics 365 Business Central space, USTPay is a payment solutions provider that is pre-integrated in the platform, providing real-time fraud alerts and risk mitigation right within the environment you’re familiar with.
Secure Payment Processing. Your customers are watching. If they see that your company is committed to rigorous credit card security measures and keeping their data safe, you’ll be rewarded with their loyalty, strengthening your reputation.
Partnering with a reputable and reliable payment solutions processor like USTPay can bolster PCI compliance security measures via secure payment gateways to ensure the safety of your customers’ data – and it’s already integrated into Dynamics 365.
Practical Fraud Detection Tips
As a takeaway, here’s our list of the 5 most valuable and practical tips for stopping fraud in its tracks within your company:
Train your workforce to recognize and report signs of fraud or suspicious behavior.
Watch for warning signals: mismatched billing and shipping addresses, multiple failed transaction attempts, and unusually large orders or international orders from high-risk countries should immediately be flagged and scrutinized with extreme caution.
Implement a process for verifying orders flagged for suspicious activity. An email confirmation, phone call to the customer, or some other type of validation will reduce fraudulent transitions while building trust with your customers.
Consider payments orchestration to centralize, streamline, and manage payments processors, methods, providers, gateways, and security vendors.
Partner with a company that will bring your security vision to life, protecting the data of your valued customers – and your reputation in the industry.
Are you ready to learn more about how Dynamics 365 Business Central and USTPay integration can help you prioritize customer data security, protect your company with anti-fraud technology, and strengthen your reputation?
Reach out to learn more about our solution, which was built with security in mind from the start: https://www.ustranscorp.com/ustpay or contact us at https://www.ustranscorp.com/support
About the Author:
U.S. Transactions Corp., a premier B2B enterprise service provider, collaborates with its clients to deliver an exceptional experience every time, from industry-lowest rates and cutting-edge technology to Level-3 processing that can save your organization up to 30 percent on costs!
Since 2009, UST has been a trusted source for Commercial Enterprises, Associations, and Nonprofits looking to maximize their success rate through superior payment solutions designed specifically for them.
USTPay is a product of U.S. Transactions Corp. and is available on Microsoft AppSource.