How Merchant Terminals Can Prevent Credit Card Processing Fraud

merchant services terminal for accepting credit cards in retail small business

Business owners run hundreds of card transactions a day ranging from a few dollars for lunch to thousands for materials or other goods.

Fortunately, their payment terminal can work just as hard as they do to prevent card processing fraud.

What is a merchant terminal?

A credit card terminal is a key hub of a company’s operations. A point-of-sale or POS system is one example. Simply put, these systems allow a business to accept credit and debit card payments. Some are tabletop design, some can connect directly to smartphones, and others are portable, handheld devices like those often seen at restaurants. Most terminals today have chip readers or contactless payment options to reflect the changes in credit card design and need for increased security.

Choosing the Right POS System

What liability does a business have if there is credit card fraud?

Though each situation is different, a business can lose out if there is credit card processing fraud related to a purchase.

Some fraudulent transactions involve an actual card, called “card present,” while others involve "card-not-present" fraud. One example is someone using a stolen card at a retail store versus a thief using a credit card number to pay for goods online.

Merchants who have not upgraded to chip or contactless terminals and still use older swipe payment terminals may incur more liability. In one example, the business may be liable if a stolen chip card is processed as a magnetic strip transaction.

If a customer disputes a charge on their card, the chargeback process begins. Also referred to as payment disputes, chargebacks can cost a business twice the original transaction if fees and penalties are added.

Rules vary depending on the combination of card type (chip or magnetic stripe) and terminal style. The side with the advanced technology, however, will typically win a liability argument. If the merchant terminal is up to date, liability may fall on the card issuer. If not, the merchant may incur the loss.

Merchants should familiarize themselves with the rules on chargebacks and liability as most are dictated by the credit card networks such as Visa, Mastercard, American Express and Discover.

How can merchants protect themselves from credit card fraud?

Merchant terminals with the latest security features are one of the best defenses against fraudulent transactions. It’s vital to look for a merchant terminal with encryption capabilities for all types of payment and tokenization services that shield card data from hackers.

Businesses should also strongly consider using EMV technology if they’re not already doing so. Commonly known as chip technology, EMV “talks” to the payment terminal to ensure the validity of a payment card and the person using the card. This kind of chip or smart card technology adds extra security as it’s very difficult to subvert.

EMV can protect a business from accepting counterfeit, lost or stolen cards. Whether a customer is inserting a chip card or tapping their phone on a device for contactless payment, data on the EMV chip ensures the card is authentic.

Other security benefits include decreasing the risk of counterfeit, lost or stolen cards; reducing skimming at the point of sale; fewer chargebacks; and preventing scammers from copying the contents of the chip to another card.

How can the right POS system improve customer service?

Potential customers want to know their data will remain secure when they’re shopping. In fact, according to BusinessWire, more than 80% of consumers around the world consider "security" to be an important factor when making purchases online.

When a business is using a secure merchant terminal with the latest features, they not only improve security but also create a faster checkout, greatly improving the customer’s overall experience.

Today’s merchant terminals allow for PIN transactions for both credit and debit transactions, reducing the need for a signature. Those that support contactless payments can process approximately 53% faster than a traditional magnetic stripe card transaction. Want to know more about the latest in secure merchant terminal technology? Wondering if your terminal is safeguarding your customers’ information? Contact one of our Merchant Services representatives.

About the Author: Elizabeth Levister, Merchant Services Sales Manager, has 22 years of banking experience. She began her banking career as a teller while in college, and later grew passionate about the Merchant Services industry. During her 15 years with SouthState, Elizabeth has worked on multiple projects developing strategies to take the Merchant Services Department to the next level.

  • This content is general in nature and provided for informational use only. Content may be used in connection with the advertising and marketing of products and services offered by SouthState Bank, N.A. and its subsidiaries and affiliates. This is not to be considered legal, tax, accounting, financial or investment advice. You should seek individualized advice from personal financial, legal, tax and/or other professionals, as appropriate depending on the specific facts of your situation. We do not make any warranties as to the completeness or accuracy of this information and have no liability for your use of this information.

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