A Guide to Fraud Prevention Options for Small Businesses

fraud prevention

Consumers lost almost nine billion dollars to scams across the United States in the year 2022. This is a huge number of issues for both consumers and the businesses they buy from. If you have concerns about this, what are you doing to boost your fraud prevention strategy in your company?

If you have not started, or want to know more, we list several of both the simple and more complex things you can do below. As a small business owner, think about how easy it would be to put in place each item and also consider the danger of not doing so.

The Importance of Fraud Prevention

As a small business, you will want to ensure you protect yourself from many dangers related to your finances. Fraud can cause you direct losses from things like:

  • Chargebacks
  • Identity theft
  • Unauthorized purchases

Each of these can lead to a direct loss of money for you, as well as a loss of inventory if you send items to people then do not get reimbursed. In the worst cases, the reputation of your business will also suffer a hit if others hear about how you have succumbed to fraud attempts.

Options for Fighting Fraud

There are both simple and more complex ways to engage in fraud prevention. You should have a good idea of what they all are, so you can know which you can put in place with the resources you have. They include the following:

Employee Training

Trained employees who can recognize possible problems can often be your first safeguard against fraud. They can put human context in place over anything they see.

For this reason, a robust employee training system alongside any automated system you have can act as a holistic process. It can detect issues you might not otherwise find.

You have many options in how you want to run these. You can use on-the-job training if you do not have time for dedicated sessions. Or, you might also want to consider online courses or workshops if you can afford them.

Please note you cannot only train your employees once and leave it there. You need to not only remind them of what you trained them on before but update them on possible new threats as they emerge. 

Regular Monitoring

If you continue to watch any transactions involving your business, you can keep a good eye on any possible things that occur outside of the norm. You can then pick up on and resolve issues when they occur, rather than reacting later.

One of the first things you should ensure you do is keep a detailed log of all financial transactions. You can review these by hand, or you could also allow a more sophisticated electronic system to check them for discrepancies. As a small business, though, you may not be able to afford these yet.

You can then compare these logs to any other accounts you might have associated with your company. If someone registered in Mexico, for example, but bought items in Oregon, there might be something fishy going on. On investigating, you might even find many other accounts that appear similar, suggesting a larger issue.

Secure Payment Systems

When you install a payment system for your company, you need to make sure it is secure. Many services will do this for you so you do not need to have a vast amount of technical knowledge. However, you should be aware that a basic security system is one of the tenets of PCI compliance, as listed below.

Some of the main ways a payment system will protect you from fraud include:

Encryption measures. The payment system will encrypt the data your customers send you, including their payment data. Even if a malicious actor steals this data, it will not be useful to them if they do not have the decryption key.

Authentication systems. Many secure payment systems ensure that only authorized people can use them. The most common way they do this is via two-factor authentication.

Tokenization of data. Instead of using all the data of the customer in every transaction, tokenization replaces it with a unique token. If both the sender and receiver understand this token, it removes the need to send the full dataset all the time.

Red Flags With Customers

There are some red flags you or your employees should look out for when people buy things from you. By following up on these, you are more likely to work out if fraud is occurring and respond in time to stop it.

One of the first things you should investigate is if you see a customer has strange patterns when they buy things. This could be over a long time, or a sudden change in what they buy. For example, if they only sometimes buy small things from you once in a while, then all of a sudden make one or more big purchases, you should look into it.

Another thing to watch out for is if they ask you to rush the order along for any reason. Most of the time, this is so they can enact the fraud with you either not noticing, or noticing too late to do anything about it.

When working in a customer service role, or if you have employees who do it, make sure you know how to look out for malicious contact. Changes to account information, or what they have bought, can both mean there is something problematic happening. Ensure you have appropriate checks in place to make sure the person is who they say they are.

While it is not nice to consider, you also need to be aware of red flags with employees. When someone working for you works a lot outside of their business hours or requests access to things, they would not usually use, follow up with them. Their request might be innocent, but you need to be vigilant for the sake of both you and your customers.

PCI Compliance

You need to ensure your company complies with appropriate regulations for your region. Many of these relate to customer data, and protecting it so people cannot have their identity or money stolen.

One of the main legal areas relates to PCI compliance. This means adhering to a set of security standards set by the Payment Card Industry (PCI). Some of the main ways you can follow their requirements are:

  • Using a firewall to protect against unauthorized access to your network
  • Ensuring you and your employees use strong passwords
  • Having appropriate access control for different users
  • Limiting access to card data to only those who need it for their role
  • Encrypting cardholder data when you receive it
  • Watching your security systems to make sure they work as they should

If you do not follow PCI regulations, you could find you end up paying fines or becoming the victim of legal action. If this information becomes public, you might even suffer severe harm to your reputation, and clients or customers may turn away from you.

Address Verification

This is a way your company can confirm the billing address for a transaction matches the one on someone’s payment details. While this does not always prove fraud is occurring, you can compare it with many other factors to see if anything else is out of place.


You can use card verification codes (CVC) or card verification values (CVV) to give a little more protection. These help you determine if someone has seen the physical card involved in the transaction or if they only know the front-facing number.

These are the three-digit numbers on the back of a card. By checking these with the payment processor, you can give yet more assurance of the validity of a purchase.

Two-Factor Authentication

This is a method of ensuring the identity of someone by asking them to provide you with more than one method of proving who they are. In general, this form of scam protection uses both something the user knows and something the user has.

The thing a customer might know would be a password, PIN, or security answer. These are things a customer needs to remember or else they will not have the ability to buy anything. These are easy to steal, though, as people can watch you type them or trick them from you in many different ways.

Something a user “has” adds a layer of physicality to the transaction. It allows you to know they have real access to something related to the user. On the most extreme end of this layer, it would be something related to the user’s body, such as a fingerprint.

Usually, though, the item a user “has” would be a mobile phone or an app that confirms their identity.

Geotracking Buyers

You can track potential customers via the IP address they log in from. You can then compare this to their usual buying location to see if there is a discrepancy.

Much like comparing their billing and delivery address, this is not always an accurate measurement. Though, you can use it among other proof to make an educated guess about the user.

Geotracking is not only related to fraud, though. Once you have a user’s location, you might even be able to offer them localized options for their shop. You can also ensure you give them accurate information related to the billing of any deliveries.

Artificial Intelligence

It does not only need to be physical humans protecting your company from fraud. These days, you also have options related to artificial intelligence and machine learning. These can help you learn what is and is not a legitimate purchase.

By analyzing the transactions made over time, especially fraudulent ones, an AI can make predictions. It can often start to detect patterns you may not otherwise have seen, and pick up on issues in your processes.

Not only this, but AI systems do not need to wait to look into transactions. They can do this in real-time and assess whether they believe someone is engaged in fraud the moment they buy something. If that is the case, they can then either block the person from buying it, or they can pass the issue to a member of staff to hand-check.

Over time, the AI will become even better at this role and it will start to learn more, becoming more accurate. While there may be false positives or negatives, it constantly iterates to give itself the best chance of success.

Best Practices

Over and above the already-listed options, there are several other things you can do when it comes to protecting your business from fraud. They include:

Conduct background checks. If you have employees or contractors working for you, ensure they are safe to be around your customer data. This is especially important if you have a lot of access to sensitive information.

Be smart with suppliers. It is not only customers who might commit fraud. Do the same when it comes to your suppliers and vendors.

While it is unlikely, as they will instead want to keep you as a customer, there is always the possibility. It may not always be the company that is the problem, though, as sometimes individual employees act outside of corporate interests.

Keep on learning. The above information is not exhaustive, nor will it be up-to-date forever. Carry on finding out what else you can about scam protection for your company to prevent you from becoming a victim in the future.

Focus on Fraud Prevention to Avoid Mishaps

By considering fraud prevention from the get-go, or pivoting into it, you can ensure your company does not have such problems in the future. Still, you might need a little help getting there, and that is what we are here for. Our systems offer PCI compliance and many fraud prevention measures.

Top speak with someone about your businesses’ fraud prevention needs, please get in contact with us at Trinity payments, and we’d be happy to talior the all-in-one payment solution of your dreams.

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