Point-of-Sale (POS) businesses have redefined how millions of people access financing services globally. It involves using electronic devices such as card readers or terminals to collect payments from customers via different payment methods, including credit/debit cards, mobile payments, and cash. These payments usually occur at a physical location– a major retail store, a service provider’s counter, a corner shop, and most popularly, with a POS agent. This makes the statement that “POS is an all-in-one solution for both big and small businesses,” very valid. 

Driven by people’s need for fast, efficient, and stress-free payments, the proliferation and growth of POS businesses in Nigeria has been remarkable. Of course, thanks to the efforts of leading fintech players like Flutterwave, who are committed to making convenient payment solutions available for individuals and businesses of all sizes. But, as POS businesses grow, so do opportunities for bad actors to defraud unsuspecting customers and businesses. In this blog, we’ll discuss some common types of POS fraud and how to save your POS business from them.

Card Skimming

This involves bad actors attaching devices, known as skimmers, to your card readers. The skimmers are then used to capture and store the magnetic stripe information from credit or debit cards. The information obtained is then used to create counterfeit cards and make unauthorized purchases. 

Safety Tip to Prevent Card Skimming

Regularly inspect your POS terminals or card readers for any signs of tampering or unauthorized devices. If anything looks suspicious, promptly report it to your POS provider for assistance and avoid using the terminal to collect payments.  Cardholders should always be on the lookout for any irregularities, such as someone focusing too much on your card, that might make your card information or PINs accessible without your permission. 

Data Breaches

Cybercriminals may target POS systems to gain unauthorized access and steal your customer’s sensitive information like card details, names, and addresses. Such sensitive data can be exposed to other bad actors and used to commit other crimes, such as identity fraud. 

Safety Tip to Prevent Data Breaches

Conduct regular security audits of POS systems and networks to identify vulnerabilities and address potential weaknesses. Also, encourage your customers to always monitor their card reports through their bank statements and report any unauthorized transactions to their banks immediately. 

Employee Fraud

Dishonest employees may engage in fraud by manipulating POS transactions, providing unauthorized discounts, or conducting “sweetheart” transactions, where they collaborate with friends or accomplices to commit fraud.

Safety Tip to Prevent Employee Fraud

Safeguarding your POS business against employee fraud starts with conducting thorough background checks during every hiring process. Then, implement strict controls and access to limit your employees’ ability to manipulate your POS transactions. 

Transaction Reversals

Fraudsters may attempt to reverse legitimate transactions to receive a refund or credit for a purchase they did not make. This can be done through exploiting vulnerabilities in the POS system.

Safety Tip to Prevent Transaction Reversals

Set up monitoring systems that track transactions in real time and trigger alerts for unusual or high-risk activities. Keeping track will also provide you with records appropriate in cases of possible reversal fraud attempts. 

Stolen Card Information:

If a customer’s card information is stolen, either physically or through a data breach, bad actors may attempt to use that information to make unauthorized purchases at POS locations.

Safety Tip to Prevent Stolen Card Information

Implement measures to verify customer identities, especially for high-value transactions. This could include requesting additional identification, such as National ID cards, that correspond with the cardholder’s details for certain transactions.

In conclusion, since we’ve discovered that no payment scheme is immune to fraud, it’s important to always report all fraudulent transactions detected immediately. Knowing the common frauds associated with your POS business is crucial to doing that to protect your business and keep the industry safe.

Remember, Flutterwave will never ask for your card details, PIN, OTP/token codes, or any account-related information via call, SMS, WhatsApp, or email. If you have any security concerns about your Flutterwave POS, do not hesitate to contact us via our official email.

Published by Temitope Bamidele

Risk and Anti-Fraud