Payment Processing Security

Industry analysts estimate that between 3% and 20% of online orders are fraudulent. The exact percentage varies with industry and average ticket. There’s little doubt, however, that fraud is a big problem for internet merchants.

How can you protect your business from fraud? While nothing will eliminate the risk completely, you can reduce fraudulent transactions using some basic precautions.

If you sell high ticket items or high risk goods, take advantage of authentication protocols. Authentication protocols require user-generated PIN codes or passwords for identify verification and card validation. At check-out a box is displayed where the customer inputs a one-time pass code or PIN. Once approved, the merchant is indemnified against loss on the transaction.

The downside of using the protocols is shopping cart abandonment. Every step added to the check-out process increases the chance that the buyer will not complete the transaction. If the buyer can purchase the same item you are selling from another site that doesn’t require additional steps, it is possible a sale will be lost to competition.

Fraudsters love merchants that sell expensive items such as electronics. If you sell high ticket goods, it is wise to use some form of identity verification. For example, you can verify identity from public records or use other non-invasive methods to authenticate the transaction.

Including buyer behavioural profiling in your payment processing system helps mitigate risk. Behavioural profiling uses risk parameters to filter out fraud and disallow suspicious transactions. Constantly modify your parameters based on system feedback.

It is amazing how many businesses forget to secure internal systems. Change passwords frequently. Allow system access only to select employees and monitor their activities on a regular basis. Protect and encrypt your data. Implement network security standards with continuous updates. Establish audit trails for all transactions.

Use a PCI-DSI certified payment processor. Take advantage of special technologies offered, such as data and transaction security vaults. The extra features are well-worth the extra few pennies per transaction to help keep your business safe from fraud.