November 6, 2015 EMV Migration en_US The recent shift to EMV cards and transactions makes it even more important to guard against card fraud. Here are some tips to make your processes more secure. 3 Things You Need to Know About Detecting Credit-Card Fraud
EMV Migration

3 Things You Need to Know About Detecting Credit-Card Fraud

By QuickBooks November 6, 2015

Credit card fraud has a negative impact on consumers and businesses alike, but merchants often end up paying the bigger price. In addition to hefty fines, merchants who experience fraud can also suffer from a damaged reputation and loss of customer trust. It can also lead to chargebacks, which can result in higher credit-card processing rates.

Additionally, a recent transition from traditional magnetic-strip cards to new EMV-chip cards shifts the liability for fraud from card issuers to merchants. As such, merchants who do not use an EMV-chip card reader to process transactions when a chip card is presented can be held liable for any fraud that occurs as a result.

To assure you don’t suffer the consequences of fraudulent transactions, let’s take a look at three things merchants should know about detecting credit card fraud.

1. It’s More Common Online

Merchants who do business using an e-commerce platform or via mail or telephone order need to be especially mindful for fraud because it’s much more common with card-not-present transactions.

The National Federation of Independent Business points out some red flags to look for. These include orders with different billing and shipping addresses, using possibly bogus names and unusually large next-day deliveries.

An address-verification service can help business owners determine whether orders are fraudulent or not by double-checking the records against cardholder information at the card issuers.

2. Small Businesses Are Prime Targets

While credit card fraud is more common online, it also occurs at brick-and-mortar businesses, especially those on the smaller side.

There are a number of ways to reduce the potential for fraud during in-person transactions. Look out for abnormally large transactions, which, according to American Express, could be a sign that the buyer is in a rush to use a card before the owner realizes it’s missing. Also, take a second look if the customer doesn’t have the physical card and instead has the number written on a piece of paper or recites it from memory. Finally, an unusual-looking card could be the work of fraudsters. Look out for cards with dull finishes or typefaces that appear off. One way to prevent this type of fraud is to ask customers for personal identification to ensure it matches the name on the card.

3. Up-to-Date Equipment Will Help Alleviate Fraud

While updating payment technology won’t necessarily help merchants catch fraud, it will help prevent the fallout of a fraudulent transaction.

With the chargeback liability shift, it’s crucial that merchants upgrade to EMV-enabled credit card processing equipment. The new software contains chip-and-PIN technology, which is more effective than a magnetic strip in preventing fraud. EMV technology increases card data security mainly by making it virtually impossible to create counterfeit cards and by requiring cardholder authentication that verifies that the card belongs to the person using it.

As an additional security measure, merchants should make sure they are using payment technology that is compliant with PCI standards.

When it comes to credit card fraud, merchants have a lot at stake. The best defense is to be aware of common fraud scenarios and use payment technology that can help prevent fraud in the first place. For more tips on avoiding card fraud, check out our article on four ways to spot a fake credit or debit card.