Insufficient security checks and the complexity of taking online payments leave small businesses massively exposed to payment processing fraud. And while there has been some improvement, this is still a problem. The problem is made worse by the fact that businesses are expected to bear the brunt of this fraud.
But it’s not all doom and gloom. Banks have tightened their own security systems, including physical devices for taking online payments, but despite lower levels of online fraud, SMEs are still left baring the brunt of breaches in ‘secure’ online payment systems.
Why are SMEs suffering so much? In short, it’s both the complexity of the process and lax security. SMEs don’t fully understand the complexities in taking secure online card payments, not to mention that they’ll be the ones who are held responsible for the fraud.
Unfortunately, it’s all too common for purchases to be made using stolen credit card information, but other problems may occur when the cardholder rejects the transaction and a chargeback fee is issued from the bank. This means that the e-commerce merchant (you!) will have to refund all incurred expenses and pay chargeback fees.
There are various things you can do in order to prevent online credit card fraud. One example is investing in some geolocation technology. This will provide you with the website user’s exact location by IP address as well as real-time e-commerce transactions which can, in turn, help to identify geographical locations where the probability of fraud is the highest.
Another useful check for SMEs to make is calling the credit card issuing bank to verify the validity of the credit card and ensure the card is not stolen.
Equally, it’s wise to implement a secure e-commerce payment gateway. This is a service that authorises credit card payments and processes them securely with a user’s merchant account.
Other tricks for wily business owners to keep an eye out for are anonymous proxy servers being used to place orders, comparing the IP address country with the billing address country.
It’s also an idea to watch out, when processing international orders, whether you are dealing with a ‘high risk’ country. The top 12 international sources for online fraud are Ukraine, Indonesia, Yugoslavia, Lithuania, Egypt, Romania, Bulgaria, Turkey, Russia, Pakistan, Malaysia, and Israel. Again, this goes back to geolocation software.
How we catch the credit card theft bandits!
As web hosts, we’re in the business of keeping checks on credit card fraud for our customers. How exactly do we go about it? We have a number of measures that we’ve developed over the years, not dissimilar to some of the tips mentioned above. In layman’s terms, each gives transactions a score – negative for good things (such as the billing and card holder address correlating) and positive for bad (using the internet in a different country to the one their card is registered in). Once we combine this information, we get what’s known as a fraud score.
If a fraud score is below -5, it gets treated as good and our systems automatically deal with it. If a fraud score is over +10, it’s treated as fraud – this will then be flagged up by one of our team. The range of information that give fraud scores is huge – and far too complex to talk about in an article! Suffice to say, we have one of the best fraud detection algorithms in the industry, and a very low level of chargebacks.
To sum up
It’s always a good idea to have a chat to your web host about being safe when it comes to credit card fraud. However, that’s no excuse for not doing what you can to keep a handle on it yourself. By adhering to the useful tips listed above, you’ll go a long way to creating a safety net for your business.
Daniel Foster is director of web hosting company 34SP.com
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