Every penny that comes into your business is money you want to keep. Unfortunately, friendly fraud is on the rise. This refers to instances where consumers report charges as fraud after receiving goods and services, so they can get the money back. More often than not, small businesses become the victim of these false fraud reports and must rely on merchant account fraud protection.
What Types of Fraud Should Businesses Watch Out For?
Any type of fraud may become a business concern over time. For the most part, when companies talk about fraud protection, the focus is on preventing friendly fraud or reducing its effects. However, even legitimate instances of fraud can become the business’s liability:
- Debit card fraud
- Business identity theft
- Account takeover
- Phishing
- Cybersecurity breaches
What Is Fraud Protection?
Fraud protection helps ensure your business does not suffer instances of friendly fraud or other illegal activities. The best services bring several tools to the table to help make this possible:
- PCI Compliance: The Payment Card Industry Security Standards Council dictates security standards to protect consumer information. Compliance is the first step toward holistic protection.
- SSL Certifications: When you get the Secure Sockets Layer symbol for your online store, customers feel safer making purchases. It also provides added security for you.
- 3D Secure Processing: When processing transactions, this tool connects the entities involved in the financial transaction. Each party can then authenticate the other.
- MaxMind Fraud Protection: Did you know a database exists that can spot suspicious activity and notify you? MaxMind is one of the most well-known providers in this area.
- Chargeback Prevention: One of the biggest risks businesses want to avoid is footing the bill of fraudulent chargebacks. Good fraud protection offers advice on how to prevent or handle cases.
What Should Fraud Protection Cover?
Good fraud protection protects your customers from the risk of true fraudulent charges by encrypting their information when they make purchases or place orders via your website. Fraud protection should also cover your business. How far that coverage extends may depend on your plan or the provider. For instance, some companies offer consultancy to resolve issues, while others resolve it themselves.
In some cases, part of your protection plan may include insurance. While insurance certainly does not prevent fraudulent charges from coming back to you, it may help pick up the bill. Ask your insurance provider if purchase insurance is included in your business insurance. If not, ask if it sells purchase insurance.
Why Is Fraud Protection So Important?
American Express reports that 72% of business managers have a growing concern of fraud in 2019. Sadly, these companies have good reason to be concerned. Fraud at all levels is on the rise. Whether data becomes compromised at your business or somewhere else your customers shop, you may end up taking some of the blame.
Financial Cost
Business Insider estimates that chargebacks will reach 130 billion by the end of 2023. One reason for the high number is that when companies pay chargebacks, the cost is rarely the original disputed value. The merchant must also pay fees and penalties, which may be as high as $100.
Time Cost
It takes time to dispute a claim when allegations arise. Do you have time to go back and forth with consumers, their banks or your providers? This can become a lengthy process. If it happens often, it can become even more difficult for you to prove the authenticity of sales or that you delivered the goods and services.
Payment Restrictions
Too many claims can also make it difficult or impossible for the merchant to continue to accept online or digital payments. This is especially risky for e-commerce businesses, because they may not have the means to take and fulfill orders any other way.
Bad PR
Today’s consumers pay close attention to news and social media. Customers may turn to either of these platforms to air concerns about fraudulent charges on a specific company’s website. This may hurt your brand image, especially if the consumer does not specify that the fraud was not the company’s fault.
Damaged Relationships
Even if you manage not to pay for the chargebacks, let someone else manage the disputes and avoid bad press, your relationships may suffer damage. For instance, the customer may feel strongly that his or her information became compromised after using your website. This may discourage them from doing business with you again.
Are You Ready To Apply for Fraud Protection?
Small businesses stay profitable by staying lean. To maintain this, business managers must think carefully about purchases and whether they feed the bottom line. Fraud protection is a good investment that protects your cash flow.
At Instabill, we make the protection of your accounts our top priority. Contact us for more information.
