Any business wants to prevent becoming a victim to point of sale fraud activity but it’s a lot more of a common occurrence than you think. When it comes to point of sale systems, it’s important to have security and protocols in place to protect your business from harm’s way.
In this article, you’ll learn about the types of fraud activity that’s out there and five ways to avoid the point of sale fraud. Increased awareness of fraud types and how to avoid them, can ensure your business isn’t negatively impacted as a result of fraud.
What Types of Point of Sale Fraud are Out There?
Before going into the tips on how to avoid the point of sale fraud, it’s worth understanding the different types that you might end up coming across and what fraud detection tools you’ll need. Some of the common frauds that you can expect with point of sale fraud are the following:
1. Refund Fraud
Refund theft is also known as refund fraud and is a crime that involves returning goods that aren’t eligible for refund or exchange for other goods. The goods that are returned are usually acquired illegally.
2. Employee Fraud
Employee fraud occurs when an individual is contractually required to work directly or indirectly for the company. They could do any number of fraudulent activities to negatively impact the business.
Worryingly, 95% of all businesses are affected by employee theft of some sort. It’s a prominent type of fraud threats that you should be aware of.
3. Discount Abuse
Many businesses will offer discounts for various reasons but some employees or customers may take advantage of the courtesy that’s extended. Discount abuse usually occurs when the employee or customer applies a discount that is inappropriate or falls outside of the policy.
4. Wardrobing
There are some customers who’ll buy the clothing with the intent to wear it and then return it after it’s been used for its intent. Think of it like renting where they’re buying something to return once they’re done with it.
Five ways to Avoid Point of Sale Fraud
When merchants are more aware of the many types of fraud that scammers can hit them with, it’s easier to spot the culprits or put measures in place to protect your brand from fraud altogether and clear the point of sale fraud.
1. Have a Good POS in Place
A good POS system is important to have in place and that can be half the battle of protecting your business from security threats through the internet.
If you currently have a point of sale fraud that’s quite dated, then it’s likely more vulnerable to being hacked or compromised in some way. When it comes to the old point of sale systems, you may not have the benefit of making the user accounts more secure.
You can also add limits to what they can see on newer systems, meaning some employees will only see what they need to see for their role.
For your POS to be effective in preventing other fraudulent activity, it’s important that it can perform functions like checking for certain customers returning too often to validating checks on payments online or in-store.
2. Monitor Any Returns
Returns happen and it might be for a number of reasons. Whether the item isn’t what the customer expected, it doesn’t fit or they’ve simply changed their mind. For most businesses, they will have a 30-day return period and if it goes outside of that, then the customer won’t be able to return it.
It’s critical to take a look at your returns carefully though because not every return is going to be a legitimate one. Falsified returns in the form of gift card returns, gift receipts that aren’t real, and returning stolen goods are all part of the scams that individuals will try to pull.
It’s important that you’ve got a system in place for checking these returns carefully before processing them as usual.
3. Provide Your Staff with Training Regularly
Giving your staff regularly training is key. From onboarding new and existing staff onto a new POS system to make them aware of the fraudulent activities that they could encounter. By giving your staff the extra training, you’re more likely to keep your business safe.
According to Harvard Business School, 70% of employees report not having mastery of skills that are needed to do their jobs.
4. Improve Payment Security Online
For online transactions, it’s important to make sure payments are made securely, not only for yourself as a business but for the customers too. They need to feel assured that their payments are going to go through without any threat to their confidential information.
Be sure to collect security codes for online transactions, including CAPTCHA. This can help tell the difference between real human customers and bots trying to scam you.
You should also consider using verified merchants like Verified by Visa, MasterCard Merchant Fraud Protection, and VeriSign.
Payment security is something that a lot of your customers will be looking for, so make use of the security systems and methods that are used to protect your business.
5. Use Physical Security In-store
There are many physical barriers that you can put in place when it comes to in-store transactions. This can help as a deterrent for fraudulent behavior because if the individuals in question are being watched, then they’re less likely to commit point of sale fraud.
Visible cameras and security systems are a good way to stop theft and those looking to run fraudulent transactions. It’s also worth partnering with anti-theft companies that provide the relevant devices that you can attach to products to stop them from being stolen.
Again, your POS systems should also be able to alert you to any fraudulent activity that’s going on in your business.
Be Aware of Point of Sale Fraud in your Business
Point of sale fraud can happen and it’s common, so you want to make sure that you’re doing all you can in order to prevent it from happening. Use these tips and advice to put security measures in place for your business.
