Combating Fraud

From 2012 through 2016, it was reported that the Federal Trade Commission had more than 12.5 million reports of fraud during that time.  Understandably, consumers lost over $725 million during that time frame.  That is a boat ton of money.  When fraud happens, it directly affects 3 parties.  The person who is perpetrating the fraud, the owner of the identity or card and the business owner.

As you can imagine, the perpetrator gets away with product for free, the identity owner is stuck with fighting their bank for money lost in time and effort, which doesn’t always turn out well, and then there is the business owner who loses out on the product.  Most fraudulent transactions average about $400 or so.

This is bad all around.  Which is why as a business owner you need to be diligent with how you process credit cards and make sure you know what to do and use the best practices with how to combat it.  Here is some not so good info.  You can do everything right and still get hit with fraud.  It’ll happen. The key is to limit your exposure.

To combat fraud, you need to know what it is and how it may show up at your business.  There are really two types of fraud, identity theft and credit card fraud.

Identity Theft

Easy enough.  This is the hardest to combat as most times the perpetrator tries to become a different person using ID, SSN’s and credit cards that have recently been applied for without the victims knowledge.  If I walk into your business with an ID with my picture on it, with the name Mike Jones and then present you with a credit card that has the name Mike Jones on it, how could you possibly know I’m not Mike Jones?  You couldn’t.  You might raise some red flags if the name on the ID and credit card didn’t really match my look. But that’s about it.

Credit Card Fraud

This is just what is sounds like.  I stole your credit card and went on a shopping spree.  I’m looking to target businesses that don’t check ID and don’t take EMV.

As the business owner, you need to teach your employees to verify ID, then write ID on the merchant receipt.  Get into the habit.  Taking EMV alone doesn’t combat fraud.  If I hand you a stolen credit card that doesn’t have my name on it and you allow me to use the ‘Chip’ in your machine and don’t check my ID, how do you know that’s my card?  You don’t.  That’s how easy it can happen.

It’s always a good habit to verify the name on the receipt matches the name on the card as well.  This works well if you currently aren’t taking EMV.  I’m not sure why you wouldn’t be by now, but again, it’s your business.

As I’ve preached all along, the absolute best way to accept credit cards for you business is with ApplePay or GooglePay. Hands down the best way to protect your business.  Currently, not many use ApplePay for purchases.  That could be that they aren’t savvy on how to use it or maybe it’s because the places they shop currently don’t offer it as an option.  Combination of both?  Probably.  Regardless, it’s the best way to pay and to accept payment.

With the industry pushing the use of EMV, consumer fraud has been on the decline in recent years.  Online and phone order fraud has exponentially increase of late.

If your business model accepts payments over the phone, you have a higher probability to be hit with fraud simply because you can’t see the card. You don’t know who’s name is on it.  That is a risk you need to determine if you want to take with your business. Same goes with online business.  When you can’t verify the name on the card with the ID presented, you have to take the word of the person that is giving you that information.

Here’s some useful information for you.  Women tend to perpetrate more credit card fraud then men.  If I would have to guess, that’s probably because most people look at women as wholesome and less likely to be deceitful.  I’m just guessing though.

If it were me, and I wanted to be better at combating fraud with my business, I would first start by accepting ApplePay or GooglePay and pushing the use to my customers.  Secondly, I would train my staff to check ID’s religiously and third, if my business model processes a large portion of my business either online or over the phone, I would try and limit the number of transactions moving forward.

I can’t stand it when I hear about businesses that get hit with fraud.  It’s disheartening to the business owner.  All you can really do is understand how easy it can happen and put procedures in place that limit your exposure.  Trust me, the guy that walks in your store preparing to commit fraud, isn’t wearing a big sign.  He’s your best friend, chatting it up, engaging and knowledgeable.  He wants you to let him walk out of you store with your product for absolutely nothing.  The question is, are you going to let him???

Until next week,

I’m Ed Craft, your credit card guy!

15 years in the business and counting.




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