Consumers feel safe using their credit and debit cards for purchases, knowing that if their card information is stolen, they’ll be protected. But what about the many businesses that process those payments every day? Some consumers assume that credit card providers take the loss when someone makes a fraudulent purchase on a card. Unfortunately, that isn’t always the case.
As many merchants learn the hard way, when a stolen credit card runs through their system, they lose. At the very least, they’ve provided products or services without being paid for them. And in many cases, banks are forcing merchants to bear the burden of the charges, even when they’ve followed their merchant agreements to the letter.
Consumer Protections
On their end, banks do whatever it takes to prevent credit card fraud, including embedding chips into cards that make fraud more difficult. This allows banks to assure their customers that their funds will be protected in the event someone tries to use their card fraudulently. Part of keeping that promise, however, is asking merchants to take measures to prevent credit card fraud. Many of these practices are outlined in the credit card processing agreements that merchants sign.
Unfortunately, by their very nature, some transactions will come at a higher risk. Ecommerce providers are especially susceptible to fraud, with their transactions labeled as “card-not-present” events, sometimes resulting in higher fees. Although a large percentage of today’s transactions are online, these transactions are still seen as risky and can create problems for a business when they do fall victim to fraud. Even when businesses take measures to reduce their risks, they still may find their processor puts the responsibility back on them.
The Process
When a credit card issuer receives notification that a fraudulent transaction has taken place, that provider initiates a transaction dispute process. The cardholder provides pertinent details about where the card was last used and whether the card itself or only the number was compromised. The issuing institution will also review all recent transactions with the customer to determine if there were any other fraudulent purchases. Once a list has been made, an investigation will begin, determining what responsibility each merchant may have for the fraud.
Merchants can reduce their risk by putting measures in place to protect themselves. Here are some recommended fraud-reduction techniques that can help stop these transactions before they go through.
- Invest in the latest technology. If you have a brick-and-mortar location, make sure you have EMV-compliant equipment.
- Use AVS and CVV. Online merchants should use Address Verification Service (AVS) to match billing addresses to the address on record for a card. Additionally, require customers to enter the three-digit CVV number located on the back of the card to prevent orders being placed using stolen credit card numbers.
- Require a delivery signature. This will make it easier to prove a package arrived at its destination. If customers realize you ship this way, it will also deter fraud.
- Act right away. If you suspect a fraudulent transaction has taken place, contact your payment processor immediately. You may be able to mitigate damages by taking action early.
However, even with these measures in place, and even though you’ve followed the advice of credit card companies to the letter, it will be on your company to fight the disputed charge. In many cases, you’ll lose, which means you’ll take a loss on the merchandise and be forced to pay any chargeback fees.
Protect Yourself
Companies like Bank of America demonstrate a commitment to customer service through a $0 liability guarantee. If a customer’s credit card is stolen, the customer won’t be liable for a penny. They promise to return the funds to a credit or debit card within a certain number of business days and follow through on that promise when an event occurs. While a stolen credit card is an inconvenience to consumers, it doesn’t bring the financial devastation that would come if they were forced to take a loss on anything a thief purchased using their card.
Businesses deserve that same protection. Companies like Signifyd specialize in providing guaranteed fraud protection to businesses at greater risk, like those selling partially or wholly online. With artificial intelligence processing every transaction along with a team of fraud experts, these providers protect businesses against fraud losses by providing zero-liability guarantees to them. That means if a fraudulent transaction does make it through their system, merchants will enjoy the same protections consumers get from their credit card providers. When a chargeback is filed, the provider refunds the merchant the cost of the merchandise plus shipping and fees for the disputed item. The customer, credit card processor, and merchant are all freed from liability when the merchant combines this protection with the safeties put in place by credit card companies.
Although fraud losses are down, according to the Global Fraud Index, businesses and credit card companies still lose billions of dollars each year to fraud. Reducing risk can help businesses keep cash flow strong and remain focused on providing better products and services to grow their business. With the right solutions in place, merchants can stop worrying about fraud and feel safe accepting payments via credit and debit cards, just like consumers do because they know they’re protected.