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News - 13 August 2010

Credit card fraud – a minefield for the uninitiated

Insufficient security checks and the complexity involved in taking online payments are just two factors leaving small firms exposed to payment processing fraud, the Forum of Private Business is warning.

Online trading is an increasingly important source of revenue for small firms but many business owners have little or no experience of the contractual processes that can be involved in accepting credit cards.

Further, entrepreneurs who do take online card payments are left paying the price of fraud if supposedly secure payment systems are breached. During the past month the Forum’s member helpline has seen a notable increase in calls about payment processing fraud.

In order to prevent large losses by spotting potential fraudulent activities early the Forum’s Adviser on Merchant Services, Richard Bradley of Accept Cards Ltd, urged merchants to put in place regular processes scrutinising orders using statistical information provided by online payment providers.

“Minimising credit card fraud takes time but, above all, it is important to acquire an e-commerce payment gateway that is secure, using supplementary security modules provided by the major credit card companies,”

“Basically, these two features request an additional password to be entered along with the credit card details of the cardholder. Fraudsters will usually have the name, address and credit card number only so using payment gateways that support these can be an effective way of minimising risk.”

Mr Bradley said that many business owners do not fully understand the processes involved in taking secure online card payments or realise that they can be left to cover the cost of fraud.

“Card fraud is a bit of a minefield, particularly with card not present transactions,” he added. “In order to combat it, e-commerce merchants must first understand why and how fraudulent transactions take place.

“A credit card fraud is a transaction where an e-commerce merchant is unaware of the fact that a placed order will not be paid for by the cardholder. Typically, credit card information is gained illegally, for example by being stolen or traded, and the fraudsters then use it to order merchandise or services under false names.

“As soon as the original cardholder receives a statement from the issuing bank a chargeback is issued and the e-Commerce merchant has to refund all the expenses, and cover the hassle by paying a chargeback fee.”

Forum member Stuart Mayhew is the Managing Director of North Leicester Motorcycles, a motorcycle dealer in Coalville, Leicestershire. He said his business takes approximately 90% of all payments via cards.

“I’m appalled that card suppliers are allowed to retrospectively snatch back payments,” said Mr Mayhew. “If you apply for authorisation and get it and the money is in your bank it’s just terrible that they can come back and say ‘sorry, we shouldn’t have authorised that but we are taking the money back’.”

For more information on how to protect your business from fraud contact the FPB on 0845 612 6266 or visit

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