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Fraud Management Techniques Every Business Owner Should Know

Identity theft and fraud cost consumers more than $16 billion per year. A large chunk of this is due to credit card fraud and right in the middle is the business owner. Angry customers tend to vent their frustrations at the merchant, and high-risk merchants experience this more often than others. In order to prevent cases such as these, merchants are recommended to safeguard themselves and their customers against fraudsters and here’s how.

Clear Out The Loopholes

Fraud issues that plague merchants are tough to handle as it is, but when these issues arise from staff it makes things all the more tricky for an employer. Whether the fraud arises from staff dishonesty or a lack of following the laid down procedures, it reflects poorly on the merchant. One way to resolve this is to ensure that there are proper procedures in place and that there is no room for error. A foolproof system provides employers with peace of mind and also gives employees the confidence that they’re doing their jobs correctly. It also makes it easier from an operational perspective to identify suspicious transactions.

Choose Chip Cards And Educate Customers

Visa reported a drop of 70% in their card fraud when chip card technology was introduced. This is because the transactions are embedded on a microchip and before a transaction goes through, customers are required to enter their unique pin. Although card skimming is still prevalent, the chip technology makes it a little more difficult to duplicate unless the fraudster gains access to the unique pin as well. For online purchases, card companies have made an SMS verification part of the purchase procedure in order to curb online card fraud. Customers who apply for new credit cards can rest assured that these will automatically feature the chip technology, thanks to the EMV regulations.

Card Not Present Safety Measures

Although card companies have introduced the chip technology to their cards, the function does not really feature online. Apart from the verification SMS, there is little else card companies can do to secure card-not-present transactions. Merchants have the responsibility to make their online payment portals more secure by introducing additional security checks and verification layers. Some are even going to the levels of introducing multi-level captcha verifications to ensure that their site isn’t targeted by spambots. Thankfully, Google now warns visitors if a site is not secure which compels the website owner to introduce extra layers of security. Password managers and regular updates to both the site and its extensions will ensure the site is less vulnerable to attacks.

Merchants may not be directly responsible for fraudulent activity that takes place with their devices or online payment portals, but it will do reputational damage if word gets out. It also strengthens the financial institutions’ case against merchant services for that specific industry, especially the high-risk ones. Although consumers are responsible for keeping their information secure, the onus is on the merchant to protect their own reputation. By following a few simple steps the opportunity for fraudsters can be significantly reduced.