What Restaurant Owners Need to Know About Credit Card Fraud

Since their introduction to the market in 1958, credit cards have become a staple of financial institutions and consumers as the primary alternative of cash. Over the years, criminals have created innovative methods to steal personal and financial information from credit cards. Thankfully, modern cybersecurity measures have ensured that instances of credit card fraud have become quite rare.

One of the significant industries that frequently see credit card usage is the restaurant industry, making it essential for restaurant owners to know about credit card fraud. Since they’re dealing with hundreds or thousands of card transactions per day, restaurants are subject to credit card fraud at a much higher rate. This is more important than ever, with digital payment becoming increasingly common in the current COVID-19 pandemic lockdowns.

You May Be on the Hook for the Charge

Credit card fraud consequences have hefty implications for both the restaurant owners and banks involved in the transaction. After all, someone has to pay the tab. Credit card fraud mainly falls under two categories—“card-present fraud” and “card does not present” fraud.

As the owner of the establishment, it will become your liability to pay for “card not present” transactions in the case of fraud and when they use an older “swipe” rather than chip method of taking payment.

On the other hand, the banks are responsible for “card present” transactions that are fraudulent. Banks sometimes absorb the owner’s liability through a dispute process known as “chargeback,” but such instances are rare.

Old POS Technology Opens You Up for Liability

Older, outdated restaurant technology and legacy hardware are simpler to hack and are typically a breeze for hackers and criminals. Leveraging modern card payment services is the preferred way to keep yourself and your information safe. Credit card fraud instances are more likely to happen if:

  • Using a swipe reader instead of an EMV chip reader,
  • Using a hand-held card payment device, or
  • Using payment software that is not up to the task.

By updating your POS technology, both hardware and software, you can easily prevent these scenarios. Since credit card payments have become more prevalent during the pandemic, updating your point of sale system is more important now than ever before.

The Most Common Types of Credit Card Fraud

As technology continues to evolve, banks and individuals have increasingly become targets of credit card fraud. Modern cybersecurity measures can easily take care of the standard methods of credit card fraud incidents such as chargeback frauds except for two—skimming and hacking.

  • Hacking: The oldest and still the most active threat in credit card fraud, hacking has evolved drastically over the years. Despite the best measures and efforts, most modern cybersecurity systems are still susceptible to hacking. When hackers commit credit card fraud, they’re often after one thing- information.

Using the stolen data, which usually includes the cardholder name, card number, expiration date, and internal verification code, hackers can charge credit cards. The billings for the purchases are charged to the cardholder who finds out about it one day out of the blue when checking financial statements.

These days hackers don’t even bother with individuals, preferring to steal data from business databases. Due to most restaurants having lax cybersecurity measures, they make a perfect target for hackers.

  • Skimming: Skimming is a relatively new technique that is being used for credit card fraud in the last few years. It’s a form of manual hacking where thieves aim to steal data from a credit card’s micro-chip using an electronic device. In the past, the main targets of skimmers were ATM booths.

Naturally, this means they have to possess the card for a short time physically, and the prime suspects are often the waiters who have access to the card when taking payments. Often the staff is just part of a more massive ring of criminals.

How to Reduce Your Risks

Here are some of the easiest ways to reduce the risk of credit card fraud in your business if you’re the owner:

  • Update to the latest POS technology and train your staff in their proper use,
  • Use AVS (Address Verification Service),
  • Review the receipt info with the card, and
  • Check customer ID every time, even if they are regulars.

Preventing Credit Card Fraud is the Next Big Challenge for the Restaurant Industry

There is a considerable chance that the regulations and restrictions for COVID-19 will remain intact in the near future. As credit card payments in restaurants become increasingly common, so will instances of credit card fraud. Make sure you’re well-equipped to tackle the challenge!

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