Here’s How Small Businesses Can Reduce Fraud and Chargebacks During the Holidays


It’s the most wonderful time of the year… and unfortunately, the most prominent time for fraud. With consumers buying gifts for loved ones and businesses offering stellar sales, fraud and chargebacks skyrocket during the winter months and unfortunately, can affect both consumers and businesses.

As a small business owner, you work hard for your money and it’s crucial to stay educated on tips and ways to decrease the chances of your company experiencing fraud. Likewise, small businesses that are hit with multiple chargebacks could experience substantial losses to their revenue – causing them to even potentially shut down their business.

To help you as a small business owner, learn more about fraud so you can reduce your chances and learn valuable tips to avoid chargebacks:


How do fraudsters typically commit fraud?

One prime way fraudsters will commit crime is by contacting merchants via phone or email and express extreme interest in large ticket items that aren’t usually bought items. Typically, fraudsters already have performed reconnaissance on the merchant through their website or social media, so they’re aware of contact names and product offerings.

During the transaction process, the credit card that is used is normally open/active and is used to conduct multiple compromised accounts. It is also common during the scam for the perpetrator to request the transaction be initiated via phone or as card not present to prevent them being tracked. In some cases, the fraudster may request that the product be shipped out of the country by the most expeditious means possible. Once the sale is approved, the fraudster may state that an associate or family member will come and pick up the product directly.


How can small business reduce instances of fraud?

Use extreme cause when accepting unsolicited telephone and internet orders that fall out of your normal course of business. It is also important to educate/train your employees on the correct ways to accept card-present transactions. If your in-store payment solutions are EMV-capable, be sure that consumers are properly inserting their chip cards within the terminal and are not swiping. If for some reason the chip card is not processing, do not swipe or override the card and instead, ask for another type of payment.

If your small business accepts card-not-present cards for online orders, make sure and implement the Address Verification System (AVS) on your checkout site to verify the consumer’s address, capture the IP address of each transaction, and require that the CVV code be entered in upon completing a sale.


What are Chargebacks?

Chargebacks take place when a cardholder disputes a charge in hopes to receive a refund from their card issuer. If the card issuer finds that the dispute is justified, then the merchant is held responsible for the charge that previously was approved and potential fees. While some chargebacks disputes may be warranted, such as a defective or lost item, some cardholders will cheat the system and purposely try to get their money back, even if they received the item correctly and on-time.


How can small businesses avoid chargebacks?

At this point, most merchants have become EMV-compliant and have met the new regulations of the liability shift. If you’re a small business and still have not upgraded your payment equipment, then now is the time to make the change. Small businesses can greatly reduce their chances of experiencing a chargeback with EMV-compliant solutions.

In case you must refer to a past transaction, you should additionally keep accurate records of all past records. Such examples include any signed documentation such as contracts or receipts, amounts and the dates of past credit card transactions, a customer’s authorization information. This paperwork will greatly help you as a small business in the instance of a chargeback so that you are able to prove information on a prior transaction that occurred against consumer’s who are deliberately trying to receive an unjustified refund.


With instances of fraud and data breaches on the rise, it is imperative to partner with a payment processor who has the expertise and solutions in place to prevent such circumstances from happening. By partnering with SignaPay, you will gain the assistance of our internal risk monitoring team who will monitor your business daily and flag any suspicious transactions or issues that could potentially be fraudulent. If we suspect an incident of fraud, we will notify your business instantly. Gain peace of mind and rest assured that your business is in the best hands possible with SignaPay.


For more information, contact New Merchant Inquiries at 800.944.1399 or

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