Whenever money changes hands between you and your customers, risks are inevitable. This is especially true when it comes to credit and debit cards and other types of digital funds transfers. No one understands this better than merchant services providers, the companies that assist businesses like yours in all facets of the payment process.
Learn what they look at as they evaluate your business for risk, so that you can take concrete steps to lower yours.
Common payment risks
There are several types of risks that frequently occur with payments. These include fraud, chargebacks, technical issues, regulatory noncompliance, and jeopardy from third-party vendors.
Just like you, your payment provider is in business to make a profit. Consequently, it is in their best interest to work with clients who represent the lowest likelihood that there will be issues with their client payments.
During the underwriting process that occurs when you apply for their services, they will carefully examine your company to see how vulnerable it is to the most common forms of payment processing risks.
Fraud
The most often seen payment risk is fraud, and it takes many forms. These include identity theft, account takeover by the fraudster, phishing scams that entice victims to reveal sensitive details, social engineering, data breaches that hack into systems, and card-not-present fraud.
Especially during online payments that do not allow you to physically see or interact with the shopper or their payment method, the risk of fraud is higher.
Chargebacks
Another common risk is chargebacks, which occur when a customer goes directly to their bank or credit card provider to ask for a refund after making a purchase from your store.
These can stem from numerous reasons: confusion, buyer’s remorse, dissatisfaction with a product or service, or the deliberate desire to commit fraud.
Regardless of the cause, chargebacks can be financially costly to your business and can require stress and effort to dispute. If your business racks up too many of them, your payment provider might hit you with penalty fees.
Technical issues
Payment processing occurs with the help of a complex system of players, all of whom are connected via the internet. If issues arise at any point with your internal system or the entities to which it links, the transaction might be interrupted.
Should this occur frequently, you will experience significant delays, customer dissatisfaction, and potential loss of profits.
Regulatory noncompliance
Regardless of which point of sale system and processing vendor you use, everything must be in compliance with regulations that protect cardholder data at every touchpoint during the payment.
Failure to comply with established regulations such as the Payment Card Industry Data Security Standard (PCI DSS) and the revised Payment Services Directive (PSD2) that helps to ensure strong authentication can lead to significant penalties from even a high-risk merchant provider.
Third-party vendors
Finally, vulnerabilities don’t just come from your own internal systems or practices. You can also suffer if one of the vendors or providers on whom you rely do not make operational security practices a priority.
This underscores the importance of care whenever you are vetting a third-party company.
Strategies to minimize your risk
Doing everything you can to limit your vulnerability to risk will help your business.
Use tactics such as ensuring regulatory compliance, making strong data security procedures a priority, implementing robust fraud prevention measures, picking the best payment processor, and minimizing chargebacks.
Ensure regulatory compliance
Start by making sure that you are in compliance with all facets of PCI DSS.
In order to do so, you will need to build and maintain a secure network with procedures to protect cardholder data, implement access control measures, monitor and test your networks, and create and maintain an information security policy.
Protect your customers’ data
In addition to PCI compliance, there are other data security precautions that you should take. Protect data at rest and in transit with protocols like TLS/SSL.
Substitute unique, meaningless tokens for sensitive data, and limit access to payment data only to those who need to know it.
Furthermore, institute protocols that require strong, unique passwords that are changed regularly.
Update software and systems with the most recent patches, and be sure that your network is protected with a strong firewall.
Make fraud detection a priority
In order to combat the security breaches that can be so destructive to your company, invest in fraud detection tools that analyze transactions as they are happening to spot suspicious anomalies and patterns.
Be sure that customers are who they claim to be with strong procedures such as multi-factor authentication, address verification (AVS), and card verification value (CVV). Maintain continuous vigilance to remain aware of even new and emerging threats.
Choose the right payment provider
Safeguarding your company also involves partnering with the best payment processing provider. The one that you select should be Level 1 PCI DSS certified and should have robust security features such as encryption, tokenization, and fraud prevention systems in place.
The company should offer complete fee transparency and should support a variety of payment methods, enabling them to grow and change right along with your business.
They should also offer reliable, accessible customer support to help you navigate any technical challenges that you may encounter.
Minimize chargebacks
Finally, controlling chargebacks can minimize financial losses to your business and keep your relationship with your payment processor running smoothly.
Reduce the chances that customers will contact their card provider to request a funds return by providing clear descriptions of all products and services so that people know exactly what they are buying.
Respond to questions and concerns promptly and thoroughly. When products are delivered require signatures or other forms of proof. Should a chargeback inquiry be filed, respond immediately, providing all requested documentation.
Finally, analyze the patterns of chargebacks that have been filed against your business over time to pinpoint the root causes and further help you in reducing their numbers.
While no business can operate totally free of risks, you have a great deal of control over keeping your numbers and types manageable.
By doing so, you will maximize profits, increase customer satisfaction, and have a trouble-free relationship with your payment services provider.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
