What Are The Risks To Accepting Credit Cards?
Overlooking simple security risks involved in accepting credit cards could affect your business massively and lead to lost revenue, fines and a damaged reputation. Below are the risks and disadvantages involved in accepting credit cards:
Risk of fraud
Unfortunately, credit card fraud happens daily. In 2018, £1.2 billion was stolen through fraud and scams in the UK whilst in the United States, the losses in 2018 were $6.4 billion.
It’s important to note there is always the potential for fraud, especially if you sell online. Fraud can be extremely costly to your business, from fines and fees due to chargebacks and also lost products.
Thankfully there are many tools and services to help protect against it. Online businesses should look for assistance from their card processor / PSP provider who can advise on how best to protect your company and your customer.
Risk of data breaches
In 2019, the average cost of a data breach was USD 3.92 million worldwide according to a report, conducted by the Ponemon Institute. In light of that businesses must adhere to the Payment Card Industry (PCI) Security Standards when it comes to processing credit card transactions. These guidelines are in place to make sure all companies protect their customer’s credit data.
There are various other methods such as Tokenization and Strong Customer Authentication (SCA) to help avoid a data breach and reduce the risk of accepting credit cards. Tokenization is a security measure that adds an extra level of safety to sensitive credit card data by replacing it with randomly generated numbers and symbols.
SCA is part of the European Union’s (EU) revised Payment Services Directive (PSD2), which was created to improve the security of payments and prevent fraud. All payment service providers within the EU will have to implement the changes by September 2021, which centre around multi-factor authentication to increase the security of payments. Essentially, it means customers will need to provide an additional form of identification, as well as their credit card details. This is something you should discuss with your PSP when thinking about introducing credit card transactions.
There are fees involved when accepting credit cards, and so you need to consider this in your calculations. Most card companies charge a percentage of every transaction, which do inevitably add up.
Essentially chargebacks are disputes by a customer over transactions when they aren’t satisfied with a product or service. It can be difficult and costly to override chargebacks, even when the customer isn’t right.