Even though the finance sector is today flooded with fraud prevention and management tools, credit card fraud is still a significant challenge for ecommerce retailers. Surprisingly, a majority of small business owners are still unaware of the repercussions of credit card theft. This article explores the impact of credit card fraud and features to look for in a credit card fraud detection solution.
Impact of This Type of Fraud on Your Business
If a card is reported stolen, you, as the merchant, incur all the liability. You have to pay the bank what it is owed, and you may also get penalized by the credit card lender through chargebacks.
In some cases, such an incident might even result in the cancellation of your processing account. Keep in mind that beyond the penalties, there is also no way to recover any goods purchased using the stolen card. This means an additional loss.
Unfortunately, it doesn’t end here. Credit card fraud also causes customers’ distrust. Therefore, you lose a good number of loyal customers, which in turn impacts your sales. Worse still, you become subject to costly lawsuits.
For instance, when the giant retailer ‘Target’ was hacked, the company not only lost loyal customers but was also engaged in a lengthy court battle, which saw it make an $18.5 million settlement. For a conglomerate like Target, that might not be a big deal, but for a small or medium-sized business, that is a significant hit.
What Should You Do?
The only way to prevent this type of fraud is to invest in credit card fraud detection. But with the countless fraud prevention and management tools available today, how do you select the best? Ensure the fraud detection solution you opt for has the features below.
1. Predictive Analytics and Machine Learning
Even the smallest of all businesses collect vast amounts of data every day. Unfortunately, most credit card fraud detection tools today use this data to detect fraud. To ensure you are on the safe side, make sure the solution you opt for combines predictive analytics and machine learning for the most effective results.
2. Outlier Models
It is important to note that fraud patterns are often not the same. In respect to that, you want a fraud detection solution that, besides historical data, can automatically adjust to new data and make useful predictions. The only way any solution can achieve this is if it features a flexible outlier model.
3. Highly Qualified Fraud Analysts
Even though the fraud detection process is mainly automated, it still requires human interpretation. In that light, make sure the fraud detection vendor you opt for has a team of highly qualified fraud analysts. With such a team at hand, you can be confident that cases of credit card fraud in your business will be a story of the past. Why? Well, such analysts often work round the clock to develop more efficient fraud detection algorithms. They then use these newly-discovered algorithms to optimize the software and, as a result, enhance its fraud detection capabilities. This, in turn, makes it more efficient in detecting and preventing incidents of fraud.
As consumers continue to take on the cashless payments trend, credit card fraud is expected to get worse. The only way to ensure it doesn’t impact your business is by making sure you invest in an authentic and reputable credit card fraud detection solution.