Breadcrumb

How to Prevent Credit Card Fraud as a Merchant

Written by

The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedDec 20222 min read

Preventing credit card fraud should be a priority for your business. This involves protecting your customers from fraudsters and proving a secure platform for taking payments - both online and in-store.

Large volumes of fraudulent transactions can be devastating for businesses. It often results in companies losing revenue as banks and customers recoup the lost funds, and can also harm an organisation’s reputation.

Staying alert and having adequate security measures in place can help keep your business and your customers safe from fraudulent activity. That’s why in this post, we’ll outline some tips on how to prevent credit card fraud as a merchant.

What is credit card fraud?

Credit card fraud refers to the activity of fraudsters and criminals who use stolen credit cards or credit card information to make purchases. This is done without the cardholder’s permission or knowledge. Typically, the cardholder will not be aware that their card has been used by someone else to make illegitimate purchases until they check their credit card statement or are contacted by their bank.

How businesses can prevent credit card fraud

It’s very difficult to completely eliminate fraud, particularly if you have online stores. However, there are a number of steps you can take to reduce credit card fraud.

1. Limit data storage

Gathering data on customers can be very useful when it comes to analytics and informing a marketing and sales strategy. However, the more customer data you have in your system, the more is at stake should you suffer a cyber attack. If fraudsters gain access to your data stores, you risk subjecting your customers to credit card fraud and identity theft.

It’s therefore recommended that you limit data storage and only gather the minimum required for customer analysis.

2. Implement 3D Secure Authentication for online payments

3D Secure Authentication adds an additional authentication step at online payment by redirecting cardholders to a different page to confirm their identity. This can help prevent fraudsters successfully making payments.

3. Ensure your SSL certificate is up to date on your ecommerce site

An SSL certificate is a digital certificate that authenticates a site and provides an encrypted connection. This encryption will add a layer of protection against credit card fraud.

4. Use HTTPS (Hypertext Transfer Protocol Secure) on your online store

HTTPS encrypts data in order to protect sensitive customer details. It therefore prevents fraudsters from being able to view sensitive customer information. You can acquire HTTPS by purchasing an SSL certificate.

5. Check your ecommerce store is PCI-DSS (Payment Card Industry Data Security Standard) compliant

If you accept credit card payments, then it is a requirement that you are PCI compliant. This means that your site fulfils the security standards laid out by the Payment Card Industry and offers a safe way to take customer card payments.

6. Take payments by Direct Debit or PayTo

If you take recurring payments from customers, you might consider collecting payments by BECS Direct Debit.

As Direct Debits are 'pull' payments, they allow businesses to collect payments directly from customer accounts. As there are no credit or debit cards involved and the business is in full control of the payment, the risk of credit card fraud is eliminated.

Direct Debit also offers additional benefits to merchants, such as reducing failed payments and late payments.

Alternatively, GoCardless’s tool PayTo is an innovative version of Direct Debit, allowing merchants to initiate real-time payments from customer bank accounts. It is set to transform the way we take payments and, like all Direct Debit set-ups, allows no room for fraud. With instant customer verification, PayTo is the fastest and safest way to conduct account-to-account payments.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.