Preventing Credit Card Processing Fraud

by Michael Lawson

Often when credit card fraud is making headlines in the media the focus is on the consumer. Unfortunately the other major party impacted is the owner of the business. Interestingly the consumer’s loss is nothing, while the vendor is left covering the losses for the entire amount.

This is typically something that a small business owner is unaware of, and I would like to review some of the items that a merchant needs to know about before they beginning accepting credit cards.

As an exercise lets look at a potential credit card fraud case:

  • You sell plasma tvs. A customer comes to your store and buys the tv using a stolen credit card.
  • The actual cardholder alerts his credit card company that the card was used illegally by a 3rd party, and are reimbursed by the company for the amount of the tv.
  • You are informed that the transaction was fraudulent.
  • The transaction amount is removed from your bank account and your merchant account provider charges you a penalty fee.
  • You now find yourself without the tv or the money to replace it in your inventory. Making matters worse are the penalty fee, and the knowledge that if there are continued fraudulent transactions you will likely have your account frozen.

There are various ways that a merchant can attempt to verify the card. Sadly none of the manual methods you can employ as a small business owner fully prevent this type of fraud. Currently the best method you can employ is using a third party system such as iovation. These services go beyond the basic fraud protection methods that you can employ on your own.

Obviously you as the merchant need to determine whether these services are worth the cost. This obviously depends on the typical size of a transaction, the type of products you are selling, and the size of your business.

Fraud is an issue that impacts small business owners far more than your average consumer, and should be something that is carefully monitored by any merchant.

{ 0 comments… add one now }

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: