What's at risk when you accept credit cards?

August 05, 2019

Accepting credit cards offers benefits to merchants everywhere. Accepting credit cards and debit cards connects businesses to the payment methods their customers prefer. When you accept credit cards, your business links with the networks, payment processors and financial institutions that make electronic payments possible.

According to Worldpay’s 2018 Global Payments Report, credit and debit cards together accounted for 49% of global point of sale and 35% of global eCommerce spend in 2018. Few, if any, businesses can afford to turn away up to half of your potential customers. For many businesses, accepting credit and debit cards is simply a necessity.

Despite the clear benefits there are also risks when accepting credit card payments. Whether you’re an established business or just getting your start it’s important to understand what’s at risk when you accept credit cards—and the ways you can help reduce those risks.

#1 - Risks of losses related to fraud

From counterfeit coins and bills, to forged checks, there have always been risks in accepting payments. Today those risks often appear as credit card fraud. Payment fraud can impose a variety of direct costs to your business, from lost merchandise to fines and fees resulting from chargebacks.

At the heart of credit card fraud is the issue of identity—making sure the person presenting payment is the rightful and authorized user of his or her card. Fraudsters seek to misrepresent themselves as the rightful account holders to fraudulently obtain goods and services. That identity puzzle is made even more difficult for online purchases.

Fortunately there are many tools and services at your disposal to protect your business and reduce the risks of accepting credit cards. Start by using the latest point of sale systems. If you accept credit card payments in person you’ll want to be equipped with secure EMV chip card technology. Visa reports that EMV “chip-and-pin” technology is responsible for an 80% reduction in counterfeited fraud losses for merchants who upgraded to EMV between September 2015 and September 2018.

eCommerce merchants should look to their credit card processors and eCommerce platform providers for the latest in secure payment acceptance technologies and integrated fraud solutions. In an age where data and the intelligence to manage it are more important than ever, look to service providers who leverage machine learning and artificial intelligence (AI) to develop smarter fraud filters.

#2 - Risks of losses related to a data breach

Data breaches continue to make headlines at a scale that is unsettling for consumers and businesses alike. The Ponemon Institute’s 2018 Cost of a Data Breach Study estimates that the average total cost of a data breach globally is $3.86 million, with the average cost per lost or stolen record reaching $148.

Payment data is the raw fuel for fraud, making it especially valuable and sought after by thieves. That means that every business that accepts credit cards is mandated to follow data management best practices. Bringing your business in compliance with Payment Card Industry Data Security Standard (PCI DSS) is a requirement of all business that accept credit cards. Beyond compliance regulations, good data management habits help reduce risks related to data breaches.

Encryption and tokenization are two other important methods that reduce your risks of accepting credit cards. Tokenization solutions make it possible to accept credit cards without your customers’ personally identifying information ever residing in your data environment. Tokenization also helps reduce risk by reducing the scope of PCI-DSS compliance.

#3 - Risks to your business reputation

Customer service expectations are seemingly always on the rise. Sometimes all it takes is for the smallest thing to go wrong for a customer to be disappointed in service. Those disappointments can quickly tarnish any business reputation.

Those sensitivities are magnified when it comes to payments. Even the slightest discrepancy with credit card payments can add friction between you and your customers. On the more severe end of the spectrum, fraud from a data breach in your company can cause incalculable reputational damage.

Managing reputational risk to your business means taking proactive measures to assess and reduce security risks throughout your organization. Managing these risks starts with the selection of the right security partners. Leading payment processors can help with the people, tools and processes to reduce the risks of accepting credit cards and other electronic payments.

Connect with one of our payments experts today to learn how we help protect businesses like yours with secure transactions that minimize fraud and reduce risk.