There is an unfortunate reality in any business: You will have to deal with credit card fraud. The pain of credit card fraud is born out by credit card fraud statistics, which have noted the extreme rise in credit card fraud that Americans across the country suffer. Indeed, the rise of internet commerce, card not present transactions, and data breaches have only made these issues worse. If you are a business, you must keep these fraud charges to a minimum to your customers, your merchant account processors, and yourself.
Let’s look at some of the significant statistics involving credit card fraud. From there, we can review what your business can do to stop fraud and protect your customers.
Credit Card Fraud Losses Are in the Billions
According to J.P. Morgan, the statistics are massive, and the number of reports of credit card fraud is expected to rise in the future. For example, 86% of consumers were victims of credit card fraud or identity theft. The same report noted various scams that people fell victim to, including having their debit card or credit card accounts hacked, being tricked by fraudsters into giving up personal information or losing valuable credit card information via eCommerce sites.
The Federal Trade Commission (FTC) has made similar reports: In 2020, consumers lost $3.3 billion due to credit card fraud. This statistic is horrifying enough, but consider the related statistic: That’s an increase of $1.5 billion over the last year!
As noted by the Nilson Report, these numbers are even worse. Consider:
- $28.6 billion was lost across the entire world in 2020 due to all types of fraud.
- Of that massive number, 35.8% of those losses occurred in the U.S.
- The situation is only getting worse: New reports estimate that there will be a projected loss of $408 billion over the next ten years. Hundreds of billions will disappear from hard-working people due to credit card fraud.
Many Scams Are A Result of Identity Theft
Identity theft is a common problem for many of these fraudulent accounts. According to statistics, identity theft reports are on the rise: In 2021, the Federal Trade Commission received 1.4 million reports of identity theft. The massive surge in identity theft cases means that everyone — from individuals to businesses — must keep an eye on this fraud. Indeed, current estimates hold that the number of identity theft cases will only rise over the next few years.
Identity theft occurs when someone can successfully impersonate another person by acquiring sensitive data, such as a social security number, credit card number, or other account numbers. They can open new bank accounts, payment cards, and credit cards. They can also take out loans in the name of the victim who they scammed. Identity theft can ruin someone’s credit, damage their credit report, and cost months of heartache.
Identity theft can be tough to stop from a business perspective, mainly if it is a case of card not present (CNP) fraud. In this case, you accept a charge without the card being physically present. CNP charges happen when a charge is made over the internet or if someone gives you a credit card number over the phone. Credit card fraud is more likely in these instances because it can be harder to engage in traditional methods of verification, like matching signatures or providing identification.
In instances like this, the merchant account vendor you work with is critical. You have to work with a vendor to limit expenses, provide fraud reports, and delete any new accounts that may have been inappropriately opened in someone’s name. Thankfully, if you work with the right vendor, you can get all of these issues addressed. At Bankcard, we pride ourselves on our robust security and integration options, even for businesses that have been tagged as high-risk. As a result, we can work with you to develop an affordable and secure solution.
There Are Many Types of Scams
As a business, you likely know that many scams exist. Unfortunately, these scams are easy to miss and often hard to resolve. According to a 2021 survey, the most likely cons are as follows.
Identity fraud scams are among the most popular types of scams. Indeed, they are so popular that the following section will review these issues in more depth. However, businesses should know that there are many forms of identity theft. In all these cases, an imposter will impersonate someone and gain access to their credit, potentially opening a new credit card. This type of credit card fraud is among the most prevalent, and your business should appropriately incorporate strategies to reduce it whenever possible. These fraud cases are particularly prevalent among certain people, including the elderly and the very young.
A study by Javelin Strategy noted that COVID-19 led to a significant rise in losses related directly to digital wallets, ecommerce, and other peer-to-peer networks. These types of wallets, while popular, are often less than ideal from a security perspective. Therefore, if your business does accept cryptocurrency, you should ensure that you use a processor that can give you high-security protections and reasonable fees. Fortunately, at Bankcard, we offer such a service, giving merchants access to a world-class cryptocurrency payment gateway.
Phishing is also a prevalent type of identity theft. In phishing, someone will contact a person digitally, pretend to be someone else, and then obtain their credit card information or scam them out of money. Then, that information will be used to rack up a slew of fraudulent charges.
Some Businesses Are More Susceptible To Fraud
Unfortunately, these scams are more likely in some types of businesses — particularly high-risk businesses. This is because customers are often not careful enough with their data, or others in the industry don’t take the security of their customers seriously enough. Thankfully, you don’t have to fall into that trap, and your business can protect its customer’s data, even if it’s high-risk.
According to estimates, travel, leisure, and gaming are the industries most likely to see credit card fraud. Consider the following:
- Fraud in the travel industry increased 30% in 2020 compared to 2019.
- Travel and leisure saw an increase in fraud of 155.9% in 2021.
- Gaming saw the biggest rate of fraud increase of any industry in 2021, with fraud attempts jumping 393%.
This is the case for many reasons, including:
- The shift to a digital and ecommerce-based economy has made it much easier for cybercriminals to get your credit card and spend your money or sell it to others on the dark web.
- The nature of the travel industry — as well as many types of leisure and gaming industries — tends to be foreign-based. In some cases, these companies do not have the robust security protections as many businesses within the United States, nor do they have a government that is as dedicated to cracking down against credit card fraud.
- Much of this rise has been attributed to the pandemic and COVID-related changes in buying patterns. People shopped more online, which allowed for identity theft to occur more frequently. Furthermore, as supply chains became more stressed, people were more likely to use insecure websites when making a purchase. These pressures made it much easier for people to steal credit cards.
- The age group that is used by all three of these industries tends to skew younger. Unfortunately, younger people are more likely to become victims of identity theft and credit card fraud. Furthermore, younger people tend to be less likely to review credit reports with the major credit bureaus regularly. As a result, individuals may not realize that they have become the victims of fraud and realize that they need to connect with their credit card company as soon as possible.
This helps to explain why many components of travel, leisure, and subscription-based gaming are among the most viable businesses to be declared high-risk businesses. A high-risk business means that business is a business that has a higher than average rate of fraud. When there’s fraud, a credit card will have to issue a chargeback, meaning that they will have to investigate if fraud occurred, then reverse the charges. Staff time and processing expenses are associated with these issues, which means that vendors who have to endure chargebacks will lose money.
As a result, many businesses are declared high-risk companies. High-risk businesses are charged higher flat fees and higher charges per transaction. They will also have to provide additional information when applying for merchant processing services, including more reserve money, a credit score, a longer application process, bank account statements, and more.
This means that you have to work with a merchant account processor who understands your needs and your high-risk business. At Bankcard, we’ve been working with high-risk businesses for decades, helping them proactively identify ways to better secure their customer’s data and ensure that all businesses — even high-risk ones — have affordable access to merchant processing solutions.
What Your Business Can Do
Fortunately, no business is powerless, and every business can engage in extensive efforts to reduce chargebacks.
First, ensure you don’t create situations where your customers misidentify fraud. You can do this by updating your business billing descriptions. This billing description is written in an online or printed statement that a cardholder receives. Having this information be as descriptive as possible means that when customers look at their existing accounts, they’ll recognize a statement. At a minimum, they’ll be able to trace who the charge was from and then likely determine if it was an authorized or unauthorized charge. This protects retailers, ecommerce, and other point-of-sale merchants by ensuring that customers don’t accidentally get a chargeback issued for a legitimately incurred charge.
Next, ensure your point-of-sale equipment and online shopping vehicles are as secure as possible. Use the latest security, and work with a vendor who can provide you with this information to prevent account fraud. Unfortunately, there are countless cases in which credit card data is stolen from customers, then used by a hacker, or sold on the dark web. Working to secure credit card numbers, protect your data and reduce fraudulent activity can all be done, provided you are updating your security information.
Related: If you store customer information, make sure that information is secure. The number of data breaches has been on the rise lately: As of June 2022, 45% of all United States companies had experienced some data breach. In many cases, the information stolen by hackers and scammers was deeply personal, private financial records. Indeed, many fraud victims had their information stolen from a business. As such, you must do whatever you can to protect the data of your customers and alert them if their data is stolen. Some states, like California, have set procedures about what a business must do if they suffer a data breach. Make sure you are aware of these laws and respond appropriately.
Finally, be aware of common scams, and pay attention to the news. For example, suppose someone comes into your business to buy hundreds or thousands of gift cards. In that case, they may be the victim of a common scam in which cybercriminals use trickery to convince a person that their computer has been hacked or that they will be arrested if they don’t make a significant payment with a gift card. These scams are constantly shifting, and it is incumbent upon your business to pay attention to them to protect your customers.
Your business deserves the best in credit card processing, including a vendor that uses the most robust security measures while still offering your business an affordable price, even if you are a high-risk business. That’s Bankcard. At Bankcard, we can work with you on an array of services, ensuring that you have credit card processing that is safe, secure, and affordable. Want more information? Connect with Bankcard today, and learn more about how we can help your business thrive.