Don’t Take the Bait
The only way to be 100% protected against card fraud is to not accept credit or debit card payments of any kind which, as most small business owners know, is virtually impossible in today’s competitive and fast-paced environment. While credit card companies have made great strides to implement new safety measures (like EMV chip technology) for both consumers and businesses, credit card fraud remains a concern, especially for small businesses like salons. Because small businesses generally come with smaller budgets, that inevitably means little or no protection against credit card scams.
The Association of Certified Fraud Examiners’ (ACFE) 2022 Global Fraud Study revealed that fraud accounts for a median of 5% of revenue loss each year for the average business, which amounts to an average of $155,000 each year for companies with 100 or fewer employees, and that theft and cybercrime (especially credit card abuse) were the leading sources of fraud among small businesses.
The good news is, according to goEmerchant, it doesn’t take big bucks to protect your salon against fraud. All it takes is some strategic, proactive planning to protect your small business from becoming the latest credit card fraud victim.
Anatomy of a Credit Card Scam
The first step to protect your salon from credit card fraud is to be able to prevent it, and in order to prevent it, you will need to be able to identify the signs of fraudulent activity before a transaction is ever processed. This can be much more difficult to do for a service-based merchant like a salon versus a retailer or online merchant, but here are some signs to watch out for to help catch a credit card scammer in the act:
- An unusual-looking card with dull finishes or typefaces that appear off could be a phony.
- If a customer checks the back of the card before signing a sales receipt, this is a major red flag.
- Declined purchases on one or more cards can be a sign that the purchaser is using cards that do not belong to them.
- If a customer displays no interest in the price of requested services.
- The customer refuses to provide contact information or appears to fumble when offering details.
These red flags may indicate potential fraud, but not all fraudsters are the same and, therefore, there is no guaranteed list of indicators. However, merchants should always be vigilant and trust their instincts. When in doubt, it may be better to decline a transaction you suspect is fraudulent.
Protecting Your Salon Against Scammers
Some forms of credit card fraud can be impossible to predict or protect your business from. However, there are some precautions salon owners can take to mitigate the effects of fraud.
Updated Technology
Since you can’t simply stop accepting debit and credit card payments at your salon, if you haven’t done so already, it would be a wise decision to invest in an EMV card reader. EMV debit and credit cards are embedded with a data-encrypted chip designed to reduce fraudulent activity and protect consumers and businesses from losses. As of October 1, 2015, the liability for fraudulent transactions shifted from the credit card issuer to the least EMV-compliant party privy to the fraudulent charge. Since debit and credit cards have now been reissued with the EMV chip technology, if you are a merchant without an EMV chip reader, this liability now falls on you. While being up to date on the latest technology won’t necessarily prevent fraudulent activity, it will help to protect your salon from the fallout if and when fraudulent activity occurs. Make sure you ask your POS provider about their EMV and PCI compliant options.
Avoid Chargebacks
Chargebacks were originally designed with good intentions to protect consumers from merchant abuse. While customers sometimes have legitimate complaints that warrant a chargeback, it has made businesses vulnerable to “friendly fraud” on the part of consumers who purchase products or services and subsequently contact their credit card company to dispute the charge. A 2016 study found that 80-90% of chargebacks were resolved in favor of the customer. Even in cases where the credit card company finds in favor of the business, the business may still be charged for the investigation of the claim. Salons can work to avoid chargeback issues by making their cancellation policy clear and in writing. Having a way for customers to acknowledge and accept the terms of this cancellation policy is ideal. Salons should also make sure to handle any issues or complaints in a timely manner, reaching out to customers as soon as possible to explain why cancellation charges are in place and, in the event of a chargeback, why the salon will dispute the claim.
Ask for Identification
Perhaps one of the easiest ways to avoid potential scammers is to ask for a customer’s ID when accepting payment in person. Asking for a customer’s ID allows staff to confirm that the name on the credit card matches the one on the ID, and that the picture on the ID is in fact the person standing in front of them. If the card is signed, it also allows staff to compare the signature on the card against the one on the ID. It can feel overwhelming during busy hours, but it only takes a few extra seconds during checkout and adds another layer of protection for your salon that could save you money and a headache in the long run. Most customers will appreciate the additional measure because it also helps to protect them. If a customer seems wary or hesitant to show their identification or claims not to have it on them, this could be a red flag for merchants that the card being used is stolen.
Train Employees
Salon staff are your greatest assets, in more ways than one. Empowering your staff to identify the signs of a potential scam not only help to protect your business, their livelihood, and the customers you both serve, but it offers them a sense of ownership and trust. Teaching your employees to spot red flags means your salon has another set of eyes watching over and protecting it. Training does not have to be long or involved; it can be easily incorporated into staff meetings in small doses.
What to Do Next
If you feel your salon has been a victim of credit card fraud, there are some counteractive measures you should take to mitigate the damage:
- Immediately contact your business credit card company and at least one of the three major credit card bureaus
- Change online passwords and PIN numbers
- Closely monitor account activity and bank statements
- Request a copy of your business’s credit report
- Consider filing a police report
Unfortunately, credit card fraud is something that both individuals and businesses must always be wary of. The advice listed here is only scratching the surface and going toe-to-toe with the possibility of credit card scams can be daunting. The best protection is to remain vigilant, be aware of the resources available, and take precautions to protect yourself, your salon, your employees and customers.
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