Ten tips to help mitigate credit card fraud.

You likely accept card payments daily, but with that convenience comes the risk of fraud.

The shift to chip cards in the United States roughly 10 years ago significantly reduced fraud at the point of sale (POS). However, the rise in online shopping has fueled an increase in card-not-present (CNP) fraud. Losses from CNP fraud — where stolen card information is used for online or remote purchases — often fall directly on the business owner.

Fortunately, there are steps you can take to reduce your exposure to fraud without creating friction for legitimate customers. Your goal should be to make the buying process as seamless as possible while strengthening your defenses against fraudulent activity. Here are a few practical strategies:

1. Don't rely solely on your card processor.

Credit card companies and processors have fraud detection systems in place, but they aren’t foolproof. You should perform additional checks on your end after a card processor approves a transaction. Maintaining your Payment Card Industry (PCI) compliance is also critical. Following these security standards helps protect customer data and reduces your liability if fraud does occur.

2. Monitor for suspicious patterns.

Most e-commerce platforms allow you to program alerts for unusual purchasing activity. Watch for these red flags that can help identify patterns early to help stop fraudulent transactions before they are processed:

• Large quantities of a single item in one order.
• Multiple purchases using different card numbers but the same shipping address.
• Orders made with card numbers that are numerically similar (which may suggest stolen data).

3. Flag mismatched billing and shipping addresses.

A common tactic among scammers is using different billing and shipping addresses. If you notice this, consider taking these extra steps:

• Request phone numbers for both addresses.
• Charge an extra fee to require a delivery signature.
• Require advance payment by cashier’s check or money order for suspicious orders.

Also, be cautious with orders going to remailing services, as scammers often use them to forward stolen goods.

4. Address fraud directly on your website.

Let potential scammers know you take fraud seriously. State on your website that fraudulent transactions will be reported to the FBI Internet Crime Complaint Center (IC3). Also state that you will contact customers directly to confirm suspicious orders. These actions help in deterring scammers from targeting your business.

5. Verify by phone when in doubt.

If an order seems suspicious, call the customer directly. Fraudsters rarely provide accurate phone numbers because they don’t want to be contacted. If the person answers and denies making the purchase, advise them to contact their credit card company immediately. Not only can this help prevent fraud, but it’s also a great opportunity to build trust with your legitimate customers by showing that you care about their security.

6. Have a strategy for international orders.

International sales can grow your business, but they come with higher fraud risk. Work with your bank or card processor to identify high-risk countries and establish additional security steps:

• Require customers to contact you directly for shipping costs.
• Ask for a photo of the credit card or a copy of the billing statement for verification.
• Delay shipment for first-time international customers until the payment clears.

7. Develop a fraud-scoring system.

Certain factors increase the likelihood of fraud, such as orders placed at strange hours of the night, high-value purchases from unfamiliar customers, or orders from high-risk countries. Create a point-based scoring system that flags suspicious orders based on these factors. For example, a large international order placed at 2 a.m. might warrant a manual review before processing.

8. Delay shipping for high-risk orders.

Fraudsters rely on speed because they want to receive stolen goods before the fraud is detected. An order confirmation email that mentions extra processing time for security checks could discourage them from completing the purchase. Be especially cautious of large orders that request overnight or immediate shipping. If you decide to proceed, require a signature upon delivery to avoid stolen goods being dropped off at an unattended location.

9. Strengthen in-store pickup security.

Fraudsters are increasingly using ship-to-store options to avoid providing a shipping address. Protect yourself by implementing a few extra checkpoints:

• Require customers to present the card used for the purchase at the time of pickup.
• Verify the customer’s identity through a government-issued ID.
• Ensure that the CVV2 code and billing address match the payment details on file.

10. Use multi-factor authentication for online transactions.

Requiring customers to verify their identity through multi-factor authentication, such as a one-time code sent to their phone or email, adds an extra layer of security. Even if a scammer has stolen credit card details, they’ll be less likely to complete the transaction without the secondary verification.

Fraudsters thrive on anonymity and speed to ensure they don’t get caught. Your goal is to create roadblocks for criminals without frustrating legitimate customers. By combining smart technology, consistent monitoring and thoughtful customer interaction, you can mitigate fraud risk while maintaining positive buying experiences.