Credit Card Processing Blog

When it comes to credit card fraud, the statistics are sobering. According to Forbes, fraud costs merchants upwards of 21 billion dollars per year. In addition, the Center for Strategic and International Studies (CSIS) and McAfee recently revealed that cybercrime is a $445 billion industry worldwide.

As a merchant, one of the best ways you can protect yourself against fraud is by educating yourself. After all, you can’t fight it if you don’t know what you’re up against.

While this is far from an exhaustive list, here are a few of the main kinds of credit card fraud to be aware of.

  1. Sleeper fraud.

If you’ve ever lost or had your credit card number stolen, likely you were alerted to this after you noticed a large number of big-ticket purchases go through your account. This is pretty typical when it comes to credit card fraud. Usually, a criminal will steal your card or your info and start racking up charges in your name ASAP.

Sleeper fraud is a variation on this strategy. In this case, the criminal will acquire your credit card info and lay low for a while, opening accounts in your name and making small purchases in order to establish credibility and not set off any alarms. Eventually, the criminal will escalate their behavior and start making a large number of purchases on the stolen card. As a consumer, this is why it’s especially important to check your credit card statement and review each and every charge — even the small ones — to stop sleeper fraud in its tracks.

  1. Chargeback fraud.

If a customer receives an item that is damaged, faulty or is something that they didn’t order themselves (see above regarding sleeper fraud), they have the right to request that the charges be reversed on their credit card.

As mentioned before, a chargeback is different from a refund because it voids a credit card purchase by withdrawing funds that were previously deposited into the merchant’s bank account and applying a credit to the consumer’s credit card. If the claim is determined to be valid, the bank then forcibly removes the money from the merchant’s bank account.

However, some fraudsters will abuse the system, ordering a lot of merchandise online only to claim that it never arrived or was damaged so that they can request a chargeback and essentially get it for free. While also known as “friendly fraud,” these kinds of fraudulent chargebacks cost merchants millions in losses every year.

  1. Fallback fraud.

EMV card machines and designed to read the embedded chips that come with these more secure cards. Many card machines, however, can still swipe and process cards with magnetic stripes. While it’s difficult to fake an EMV chip, it’s easier to create a fake credit card with a magnetic strip.

Fraudsters will then try and make purchases using the fake EMV card and (surprise, surprise) the chip won’t work. Merchants will then have to “fall back” to traditional swipe and signature authorization.

  1. Synthetic ID fraud.

In the past, criminals would use a real person’s personal info to open fraudulent accounts on their behalf. This tactic has evolved and now thieves are using a combination of real and fake credentials to commit fraud. What makes this kind of fraud especially egregious is that criminals often use info stolen from children and minors — people with valid social security numbers but neither the resources nor need to monitor their credit scores closely. As a result, this kind of identity fraud can go on for decades without anyone being the wiser.

  1. Deep fakes.

Looking forward, this is one of the scariest developments when it comes to payment fraud and identity theft. Thanks to artificial intelligence, it’s now possible to make videos of people saying and doing things they didn’t actually say or do, with the goal of defrauding both merchants and customers. While this isn’t commonplace yet, the technology exists and is something to look out for in the future.

At the end of the day, protecting your business and customers from credit card fraud all comes down to educating yourself about potential breaches and being extra diligent about following best practices when you’re handling sensitive financial data.

 

Originally coined in 1997 by Kevin Duffey at the launch of the Global Mobile Commerce Forum, Mobile Commerce (also known as mCommerce) refers to the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology. In other words, it’s any kind of financial transaction that occurs through a mobile — from sending your friend money for next week’s concert tickets to ordering a new sweatshirt from one of your favorite retailers’ mobile apps.

If you think of eCommerce as a large umbrella tree, mCommerce is a growing branch, reaching down to meet customers on the go. As we become increasingly reliant on our smartphones, mCommerce is becoming the norm. Global M-Commerce sales are projected to double between 2018 and 2021, with mCommerce’s share of total online retail increasing to almost three-quarters, according to a forecast cited in Research and Markets Global mCommerce 2018 report.

The growing popularity of mCommerce comes down to the fact that it’s incredibly convenient. You no longer have to go to a brick and mortar store or tear yourself away from your phone to use your laptop in order to shop, do banking or make mobile payments. Instead, mCommerce allows you to meet your customers where they are and provide a better customer experience.

Here are a few other ways mCommerce can be beneficial to your business:

  1. Faster, easier purchases.

Not only does mCommerce allow customers to make purchases on the go, but it also makes them faster by eliminating the need to connect to a server, as one would with a traditional eCommerce site.

  1. The ability to send push notifications.

Instead of relying on email — which, let’s face it, most of us already receive too much of — mCommerce allows you to send customers push notifications directly to their smartphone. This is a great way to alert your customers about sales and promotions while drawing them back to the mobile app.

  1. Deeper analytics.

You can learn so much about your customer through mCommerce, like their age, sex, location, and shopping habits. You can then take this information to tailor your product selection to exactly what your customer loves and needs. This can also help with making marketing efforts more effective, targeted and personal. After all, nothing feels better than receiving a push notification about something that you’re legitimately interested in — whether it’s something new you’re excited about or a sale on an item you use all the time.

  1. It provides a better customer experience overall.

As outlined above, many of us are now using our phones to shop because it just feels more streamlined to make purchases through designated apps. Combine that with increased speed,  more personalized customer service and the flexibility to shop anywhere; it’s easy to see how mCommerce has the ability to offer an amazing customer experience.

  1. It isn’t going anywhere.

If you think mCommerce is a flash in the pan trend, think again. The complete flexibility of mCommerce technology means that it isn’t going anywhere, in fact, it’s likely only growing from here as more people realize it’s power.

Partnering with an integrated payments provider can be beneficial to both your business and your customers. By integrating tailored payment processing technology into your application, you’re creating a unified user experience. Everything is in one place which means that your customers won’t have to leave your platform to access other tools.

However, the process of integrating new software and business functionalities can be daunting for merchants. The process is prone to errors and can cause friction in day-to-day transactions, which may even cost you business. This is where ISVs come in.

To make things easier, merchants can partner with independent software vendors (ISVs), which can help your business flourish by opening up new markets.

While you’re aware the benefits to both the customer and the merchant, how exactly does the technology behind ISV partnerships work? Good question. First, we need to start by discussing APIs.

So, what exactly is an API?

In the world of payments, there seems to be no shortage of acronyms, however, an API plays a crucial role in ISV partnerships.

In simple terms, an API (application programming interface) allows developers to integrate one technology’s features and functions into their own software.

For example, if your company has a customer-facing app, you can use your payment processor’s API to securely accept payments and view real-time analytics from inside your app. While every API offers different capabilities, many of them allow merchants to accept both card present and card-not-present transactions, therefore providing an easy to use all-in-one solution that helps streamline your payment system.

Why is an API valuable?

That’s another great question. An API adds value to your existing technology, extending your platform’s capabilities and functionality. While every API is going to be slightly different, typically it will provide you with a variety of tools that will allow you to view analytics and efficiently manage customer information. Some APIs will also allow you to set up one-time or recurring payments and create invoices.

When you’re running your own business, time is money. By providing you with the tools to streamline all of these processes within one application, you’ll not only save yourself a lot of time and sanity, but it will also reduce the likelihood that you’ll make detrimental errors.

As a merchant, protecting your customer’s sensitive financial data should be top of mind. That’s where tokenization comes in. As we discussed before, tokenization replaces credit card numbers with a different, random string of numbers, called a “token.” The tokenized number is then stored securely and can be used in lieu of the actual card number. Because the token has no relationship to the customer’s actual data, there’s no way for the merchant to know the customer’s credit card number, therefore making it a safer option all around for storing credit card information. A good API will tokenize your customer’s payment information so that you never have to worry about your customer’s data being insecure.

Combine these selling points with the fact that you’ll be providing your customers with an integrated experience, and the value of an API is beyond evident.

If you run a small to mid-sized business, you’re at risk of a data breach. According to the US Securities and Exchange Commission (SEC), 43 to 60 percent of cyber attacks are targeted towards small and mid-size businesses. If that wasn’t worrisome enough, a study by the U.S. National Cyber Security Alliance found that 60 percent of all small businesses that suffer a cyber attack go out of business within six months of the breach. Recovering from a breach takes time and money, and often customers are slow to trust a business again after their data has been compromised.

While these statistics may seem harrowing, there are certain practical steps that merchants can take in order to protect themselves from data breaches and cyber attacks, like working with products and partners that use End-to-End Encryption (E2EE).

At first glance, E2EE may seem like yet another acronym within an industry that already feels crowded with them, but understanding E2EE is essential to protecting your business.

So, what exactly is end-to-end encryption?

We’re glad you asked. End-to-end encryption (E2EE) is a method of secure communication that prevents third-parties from accessing data while it’s being transferred from one end system or device to another. In E2EE, the data is encrypted on the sender’s system or device and only the recipient is able to decrypt it.

In other words, when you’re processing credit cards and handling sensitive financial data, E2EE ensures that it doesn’t fall into the wrong hands, therefore creating a security breach.

How does it work?

Think of the process of E2EE a bit like two interlocking puzzle pieces. When transferring data, the sender uses an encryption key which essentially scrambles the data. In order to receive the information and unscramble it, the recipient needs to have the corresponding key.

How this works for credit card processing: when a customer uses a credit card to make a purchase, their information is encrypted. It remains encrypted until the data arrives at the payment processor or acquirer who is then able to unscramble or decrypt it.

What are the benefits of E2EE?

Along with everything mentioned above, another huge benefit of E2EE is that you don’t really have to think about it. It’s built right into hardware and software, which means you there’s nothing to initiate or add-on. Your customer’s data is protected — simple as that.

The downside to E2EE is that it protects data while it’s being transmitted from the customer to the payment processor, but unfortunately, it can’t protect either of those endpoints. For example, end-end-end encryption isn’t going to protect data if for some reason it’s hacked on either end. To counteract this, many payment processors have started using Two-Factor Authentication.

Two-Factor Authentication (also known as 2FA or multi-factor authentication) requires the user to verify two separate variables, such as a password plus another piece of info before they’re able to make any sensitive changes on their account. For example, if you try to link a new bank account or reset your account password, 2FA will prompt you to enter the info above in order to verify your identity.

If you’re operating as a merchant, it’s imperative that you keep customer information such as passwords, credit card numbers and other personal data such as their home address and birthday completely secure. Using products that involve end-to-end encryption is one way to reduce the risk of a costly data breach.

As a small business owner, cash flow is something that’s always top of mind. If you’ve already done some research, you’ve probably heard that ACH processing can provide your business with a leg-up when it comes to processing payments. But what exactly is ACH processing and what are its benefits?

Good question. ACH or “automatic clearing house” is a batch processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing. Instead of using paper to carry necessary transaction information (such as with checks), ACH Network transactions are transmitted electronically, allowing for faster processing times and cost savings.

In other words, by eliminating the need for a paper check, transactions are processed electronically and merchants can receive funds much faster and easier than if they had to wait for a check to process.

Here’s how it works.

ACH payments are typically used to move funds from one bank account to another. The ACH Network processes two types of transactions: Direct Deposits via ACH and Direct Payments via ACH.

Direct Deposit via ACH is the deposit of funds for payroll, employee expense reimbursement, government benefits, tax and other refunds, and annuities and interest payments. It includes any ACH credit payment from a business or government to a consumer.

Direct Payment via ACH is the use of funds to make a payment. Individuals or organizations can make a Direct Payment via ACH as either an ACH credit or ACH debit.

Most merchants who use ACH will use it for things like paying for a service (Direct Payment via ACH) or for payroll (Direct Deposit via ACH). The funds move through the ACH Network, and the funds are deposited into the receiving bank account within a few business days. Simply put, ACH is a method for merchants to move money and make financial transactions without ever needing to use a physical check, credit card or debit card.

To set up ACH payments for your business you’ll need to work with a processor that offers them. It’s the payment processors that handle the actual payment and deposits the money into your account.

Here are a few ways that ACH processing benefits your small business:

It saves time and money.

Because you don’t have to worry about waiting for a check to process (which, isn’t always the speediest process, let’s be real), you can access funds quicker, which improves your overall cash flow. ACH credit and ACH debit transactions process quickly.  The transfer of funds from one financial institution generally happens the next day.

ACH payments are also more affordable than wire transfers, as payment processors typically offer them for free (compared to the $10-$35 banks typically charge for wire transfers within the United States). ACH payment processing also provides helpful tracking tools that allow you to easily keep tabs on payments and cash flow.

Better for recurring payments.

Lastly, ACH is much less expensive than paying with a credit card which makes it particularly helpful for recurring bills and invoices. With credit card payments, you’re subject to interchange fees and markups (which vary depending on the processor). ACH payments bypass this altogether, saving you time and money in the process.

To recap, ACH payments provides a secure option to get paid and make payments, that also saves you money on credit card fees. Because they process quickly, ACH payments can help improve your cash flow so you have the funds ready and available to grow your business.