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  • Cyber safety for business

Estimated reading time is 4 minutes.

Being able to accept payments by credit or debit card is essential for merchants in today’s world. Sadly criminals are looking for ways to exploit these payment methods and commit fraud, whether it’s at the payment terminal or online.

It’s important to be alert to payment fraud and take steps to protect your business, otherwise you may be at risk of being left out of pocket for costly chargebacks and the value of fraudulently obtained goods and services.

We’ll look at some of the ways criminals try to deceive merchants by using stolen cards or setting up sophisticated scams to trick merchants into parting with their money.

Fraudulent card transactions

There are two types of fraudulent card transaction- ‘card present’ and ‘card not present’. Different rules apply to how these fraudulent transactions are treated and who has the liability to pay back the value of the fraudulent transaction. These rules are set by the card schemes; Visa, Mastercard and American Express.

‘Card present’ fraud

A ‘Card present’ transaction occurs when the physical card is present at the time of payment. These include transactions where a PIN has been entered, or the physical card has been presented at the terminal eg Pay Pass or contactless transactions. In the case of a fraudulent transaction, this usually means that a legitimate customer’s card has been copied or stolen.

If a transaction is reported as fraudulent, the cardholder’s bank is liable to return the funds to the victim of the fraud - the genuine card owner.

‘Card not present’ fraud

‘Card not present’ fraud occurs when a transaction is processed without the physical card being present. In this scenario, the card details are provided over the phone, via email or an online payment channel. The card number, expiry and in the case of an online transaction the card verification number (3 digits at the back of the card) are provided to authorise the transaction. If a transaction is reported as fraudulent, the merchant holds the liability to return the funds to the victim of the fraud - the genuine card owner.

This process of returning funds is called a ‘chargeback’ and can be very costly to your business. There are security steps you can take to reduce the chances of accepting stolen card details.

What a fraudulent transaction may mean for your business

Even if a transaction is approved, and the funds settle into your account, the transaction may still be disputed as fraudulent. This can happen up to 120 days after the transaction has been honoured. For instance, if you have taken a booking for a hotel room for one night 3 months away, the applicable 120-day chargeback period only starts once the service has been provided. This means it only kicks in once your guest has stayed the night.

Many of these instances are covered in the Merchant Service Agreement (PDF, 598KB).

Terminal takeover

Temporarily ‘taking over’ (having the physical possession/control of the merchant terminal) can allow scammers to re-key a transaction amount, or pay for goods and services using a stolen card number. This happens when the manual key function is left switched on. The fraudster can benefit in two ways:

  • Entering or ‘hand-keying’ the details of a stolen card into the terminal to make a significant purchase and leave with the goods.
  • Entering or ‘hand-keying’ the details of a stolen card into the terminal for an amount significantly larger than the original amount and demanding an immediate refund onto another card.

Third party payment scams

Convincing a business owner to accept a card payment and transfer funds to a third party is one way criminals try to access cash from stolen cards. It’s important to never accept credit card payments on behalf of anyone else.

An unfortunate example is that of a Sydney dance school owner. He accepted a credit card payment, via email, for children’s dance lessons ($700) as well as an additional amount of money ($500) to pay a driver who would drop the children at their lessons for the term. The owner processed the agreed payment of $1200. The next day, the driver arrived and collected his $500 in cash, but the children never showed up to the dance lessons, nor could the parents who booked the lesson be contacted. As it turned out, the card details had been stolen and the request for dance lessons and payment to a driver were part of a scam. The business owner was sadly responsible for the $1200 chargeback, as well as being out of pocket for the $500 he paid in cash to the driver.

Social engineering

Criminals may look for ways to gain access to your business systems to process payments for their own financial benefit. They may use manipulative or aggressive behaviour, often over the phone, to elicit password and other security information from a business. They might try to convince you to transfer funds, give them access to your computer or use information they know about you to send phishing emails or to conduct corporate espionage.

Tips to help safeguard your business from payment scams

Being alert to fraudulent payment activity can reduce the chances of your business falling victim to scams and suffering costly chargebacks and other financial loss. We’ve got some simple tips you can follow:

  • Educate all front-line staff about fraud risks associated with your payment terminal and payment scams in general.
  • Keep payment terminals behind the counter or on the person of your employees. Don’t allow customers to edit or manually enter transactions and if you don’t require the manual key entry feature on your terminal, ask your banker to switch it off.
  • Always refund a transaction to the same card and remember to change your refund password regularly.
  • Be cautious of customers who wish to correspond via email only and are not contactable by other means such as phone.
  • Watch out for customers who claim to be not contactable and/or unable to view the goods being purchased.
  • Beware of customers who are willing to pay more than the cost advertised or place unusually large orders for goods. If it sounds too good to be true, it usually is.
  • Never accept payments on behalf of third parties or for services you didn’t provide.
  • Don’t agree to forward payments or funds to other businesses or people.
  • Be aware that if you accept transactions when the card is not present in the sale, it is you, the merchant, who is ultimately liable should a dispute be successfully raised against the transaction.
  • Avoid any requests to transfer funds via Western Union.
  • Trust your instinct – if you have concerns about a transaction, contact your bank for guidance.

If you’re a NAB customer and believe you’ve been impacted by a merchant scam, please contact us.

Helpful resources

For more information about protecting your business from fraud and payment scams, take a look at these helpful resources.

  • Australian Payments Network

As the self-regulatory body for payments, Australian Payments Network plays an important role in the governance of payment systems. They have useful resources rleatig to payment fraud incluidng statistics and reports.

  • Australian Government | Stay Smart Online

Stay Smart Online provides topical, relevant and timely information on how home internet users and small businesses can protect themselves from, and reduce the risk of, cyber security threats such as software vulnerabilities, online scams, malicious activities, and risky online behaviours.

  • Australian Government | Australian Cyber Security Centre

The Australian Cyber Security Centre (ACSC) brings cyber security capabilities from across the Australian Government together into a single location. It is the hub for private and public-sector collaboration and information-sharing to combat cyber security threats.

  • Australian Cybercrime Online Reporting Network (ACORN)

ACORN is a secure reporting and referral service for cybercrime and online incidents which may be in breach of Australian law. The ACORN website provides a cybercrime reporting mechanism as well as helpful information about cybercrime.

  • Australian Competition and Consumer Commission | Scamwatch

Scamwatch provides information to consumers and small businesses about how to recognise, avoid and report scams using publications, videos and other online resources.

  • Australian Government | Office of the eSafety Commissioner

The Office of the eSafety Commissioner provides online safety education for Australian children and young people, a complaints service for young Australians who experience serious cyberbullying, and address illegal online content.

  • Australian Government | Attorney-General’s Department

The Attorney-General’s Department website provides helpful information and resources about your rights and protections in regards to identity security, freedom of information and cyber security. The Department has developed a range of resources to assist people protect their identity and recover from the effects of identity crime.

NAB partner with the following fraud prevention companies. For further information, you can view their websites.

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