don't lose profits to scammers

Research suggests that a significant number of businesses each year are victims of payment fraud, and that they’d suffered cash losses as a direct result.

As well as the monetary impact, there can be other consequences such as lowered staff morale and had a negative influence on client relationships.

Payment fraud can be difficult to detect – most business owners want to assume payments for their goods or services are legitimate. Because there are several ways to commit payment fraud, it’s vital that business owners are aware of them. This is important not only for how you receive payments, but also for how you’re paying your creditors.

How payment fraud occurs

Among the most common methods of payment fraud are the following:

  • Returning of products – watch out for customers returning products they didn’t buy from you or customers who pick up products in store before walking up to the counter for a cash refund.
  • Stolen credit cards – ask for some form of photo ID if you’re suspicious of a customer, and double check signatures.
  • Counterfeit money – if your business accepts cash, it’s worth learning how to spot counterfeit notes, especially $100 bills. You can search online for common images of counterfeit bills and share with your cash handling staff so they know what to look for.
  • Avoid accepting checks if you can. Bad checks tend to bounce if they’re stolen, or a customer’s account is empty. Instead, ask for a credit card with photo identification or for funds to be banked online.

It's not just retail

Although payment fraud tends to happen most commonly in retail businesses, they’re not the only ones vulnerable. Fraud can happen when people order products online and then don’t pay for them, or they use your service and then find a reason not to pay the bill.

Payment fraud can be difficult to detect

Online businesses often experience payment fraud when customers have paid by credit card. The funds appear in your account and you send them the goods – should be safe, right? Not always – a common trick is that the customer will cancel the payment after 3 days and the bank reverses the funds.

Another common online problem can occur if you do not require payment prior to the delivery of the order. In this case, a customer will typically place and pay upfront for a very small order for equipment/stock. They then will place a very large order without paying, which you send, and then never receive payment for.

How to prevent payment fraud

As in most cases, prevention is always better than a cure. Chasing people who’ve swindled you is time-consuming, stressful, and not always successful. It’s far better to have measures in place to prevent payment fraud happening in the first place. Some of the best ways to avoid payment fraud are:

  • Training employees – they’re on the front line. It’s important to give them the tools and training to spot fraud at the source by regularly reviewing examples of fraud, and your business policy on what to do.
  • Daily finance review – keep tabs on your bank accounts to monitor what goes in and out daily and reconciling that to your records allows you to spot inconsistencies early before they become a problem.
  • Procedures for release/transfer of funds – document everything. Identify the main types of payment fraud that could impact your business. Then, clearly outline how to prevent it happening. Make sure your employees understand and include complying with these rules as part of their employment.
  • Stay informed – talk to other business owners, spend some time researching online, and in general keep your eyes peeled for news of any recent fraud tactics that might be trending.
  • Background checks – if you’re even slightly suspicious, there’s nothing wrong with checking up on a customer. Search for them online or in social media, ring up the company, or conduct a credit check.
  • Non check payments – do not accept checks. Instead offer debit or credit card options, electronic payments or mobile payment methods.
  • Surveillance – ensure your store has a good surveillance system to help capture any fraudsters in the act.


With these tips you can now better protect your business from payment fraud. You can also ensure you’re using the most up-to-date payment options available and moving away from old paper-based systems. The better the technology, the better the security will be, and the harder fraudsters will find it to get around the systems.

Need more guidance? Contact one of our small business relationship managers.