How can you protect your business from payment fraud?

13 February 2025 by National Bank
credit card fraud protection

Bank and credit card fraud reaches record levels every year, generating millions of dollars in losses. To maintain customer confidence and avoid financial damage, it’s essential to offer secure payment services. Here’s what you need to know about this type of fraud and what you can do to protect your business.

In this article: 

What is payment fraud?

Payment fraud involves using someone else’s bank or credit card to purchase goods or obtain a refund, whether online, by phone or in-store.

Most of the time, only the card numbers are needed for the scam. This sensitive information is obtained by various means, including stolen or falsified cards, fraudulent transaction sites or data leaks.

Card fraud affects not only the cardholder, but also the business that accepts the unauthorized transaction. It is therefore in your business’s best interest to protect itself from these fraud attempts.

What are the different types of payment fraud?

There are several common types of debit and credit card fraud. Here are a few examples:

Card-not-present fraud (CNP)

Card-not-present fraud involves making a purchase online or over the phone using stolen card details, and therefore without presenting the card. With the growth of online commerce, this type of fraud is becoming increasingly common. Since the transaction isn’t secured by authentication such as a PIN or card chip, you may have to bear the financial loss caused by this tactic. 

Refund fraud

This scam involves falsely claiming a refund from a business. For example, fraudsters may use a stolen credit card to make purchases and then claim a refund, either by returning the goods or claiming never to have received them. The financial loss is then absorbed by the company and the person whose credit card has been stolen.  

Bank or credit card skimming

This scheme involves installing a fraudulent device on the card reader of an ABM or payment terminal. This device can read and retransmit data from an EMV chip, such as card numbers, the cardholder’s name and even their PIN. Fraudsters can sell this personal information or use it to counterfeit cards.

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Good to know: To prevent card skimming, use contactless payment methods, such as Apple Pay, Google Pay and Samsung Pay. If you suspect that a fraudulent device has been placed on a terminal reader, don’t insert your card.

Phishing fraud

Fraudulent communications are the most common approach for obtaining personal information, be it an address, passwords for various accounts, a security question or even banking information, for the purpose of committing payment fraud. These communications can take the form of an email, text message, phone call, a post or message on social media or even a QR code. They often resemble an official communication and are therefore more difficult to detect.

→ Check out our article on how to recognize phishing attempts.

How can you protect your business from payment fraud?

Unlike large companies, your SME may not have the financial resources or in-house expertise to put effective fraud protection systems in place. That said, the financial losses you could incur warrant certain precautions. 

Here are a few simple and effective ways of reducing the risk of payment fraud.

Be vigilant

Encourage your staff to spot and report any unusual situation or suspicious behaviour. This also applies to debit and credit cards, which should be checked at every transaction. And make sure you regularly inspect your card readers to ensure no fraudulent devices have been installed. 

Raise fraud awareness among your teams

The first step is to ensure your staff know how to recognize fraud attempts. The Canadian Centre for Cyber Security offers free online training for SMEs (external link) to help them develop their reflexes and learn how to react in these situations.

You can also consult the Canadian Bankers Association’s Small Business Cyber Security Toolkit (external link) for other awareness-raising tools.

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Further reading
 Although it’s not always the case, payment fraud is often the result of a cyber attack. It’s important to make your staff aware of cyber security measures and draw up a contingency plan in the event of an incident. To find out what measures to adopt, consult the Get Cyber Safe Guide for Small Businesses (external link).

In these articles, you’ll find a wealth of additional information on fraud and cyber security:
→ How can you prevent impersonation fraud?
→ How to protect your email inbox from fraud
→ How to create a secure password

What should you do if your business falls victim to fraud?

If you detect bank or credit card fraud, or any other suspicious activity, you should:

  • Notify your payment service’s fraud centre immediately.
  • Contact your local police station and provide them with supporting documentation, such as receipts, emails and other useful records.
  • Report the incident to the Canadian Anti-Fraud Centre (external link). This federal agency issues fraud alerts based on reports collected from businesses and the public.

Discover more tips and tools on our fraud prevention page to help protect your business and your customers.

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