Card Fraud

Navigating the payments industry can be tricky for many new businesses. Luckily you have James from Yoco to share deep insights into how small business owners in South Africa can avoid card fraud.

Card Fraud

Losses due to credit card fraud can add up to over R 450 million per year in South Africa. It is also known to be the root cause of many grey hairs.

To help you understand card fraud, we’ve asked our VP of Risk & Data, James, and the Lorax to explain how it happens and what you can do to protect your business.

James the Lorax

What happens when a customer uses a fraudulent card?

Let’s illustrate the fraud process using the Loraxes friends – Grinch and Cat:

1. The Grinch steals a card from “Cat in the Hat” (Because Cat has no pockets).

2. The Grinch then purchases 2 Thneeds from your business for a total of R2000 using Cat’s card.

3. Cat reports his stolen card and the amount charged to his bank (Catitech).

4. The R2000 must now be paid back into the Cat’s account. The question now is who is liable?

If you as the business owner are at fault then your account will be debited for the R2000. This is called a chargeback. If you are not at fault then Cat’s bank (Catitech) will have to cover the loss.

So when would the business owner be at fault?

There are 3 situations where you may be at fault:

1. If you cannot prove the transaction was valid

To prove a transaction was valid you must have the receipt. Luckily Yoco stores all your receipts for you and includes transaction times, gps locations and signatures. This is all used to protect you in the event of a fraudulent transaction.

2. If the customer (The Grinch) used a defaced chip and PIN card

This is a trick bad guys use as some card terminals will ask you to swipe the card if it cannot read the chip. Once a card is swiped, however, the PIN is no longer needed. If you allow a transaction with a defaced chip card to go though you could be at fault because you by-passed the cards chip security feature. Please take careful note of this and ensure you only allow the transaction to proceed if you know the customer well or if you confirm his/her ID matches the name on the card.

3. A suspiciously high number of fraudulent transactions are done in a short space of time.

Unfortunately some businesses have been caught colluding with criminals to help them commit fraud. Because of this, if you are the victim of a high number of fraudulent transactions, an investigation will be opened.

What can you do to limit your risk of fraud?

As with all things prevention is always better than cure. A bit of vigilance upfront can save you a lot of time, effort and grey hair down the line.

The Lorax

The first step is to limit swipe and sign transactions as much as possible by asking your customer if they have a chip and PIN card. If you absolutely have to do a swipe and sign transaction then make sure you check the customers signature on the back of the card with the signature they sign the receipt with. If the signatures don’t match then you should not let the transaction proceed (and don’t them them leave with the Thneeds).

Other activity that could prove the person is not the legitimate card holder includes:

  • If the person purchases an unusual amount of expensive items.
  • They make random purchases, selecting items with little regard to size, quality, or value.
  • The customer doesn’t seem to know what their credit card limit is and keeps reducing the purchase amount until they are within the limit.
  • He/she charges expensive items on a newly valid credit card.
  • If photo identification cannot be provided.
  • The customer hurries you at closing time.
  • The customer purchases a large item, and insists on taking it immediately, even if delivery is included in the price.

If you have any questions or would like to know how Yoco is working to help businesses be more secure, get in touch with us at You can also read more about how Yoco keeps your data safe here.

About the author: Alice

Alice - Marketing Associate

Alice is a content junkie with a passion for crafting honest human focused stories. She did time at UCT on her B.Bus Sci degree, and completed it with all the bells and whistles. She has since focused on the digital marketing space working at a number of SA’s top agencies.

When she’s not interviewing entrepreneurs, attacking the keyboard or helping the team she’ll be exploring new wine farms in the Western Cape.

Tags: , ,

Related posts

Tech and Tools: Smarter ways to get more done in your business

This month we're celebrating businesses who are making the most of peak season and sharing insider advice from the Yoco founders.

In this article co-founder and chief technology officer, Lungisa Matshoba, shares his favourite tools and tech that help him and his team get more done in a faster, smarter way.

How to start accepting credit card payments

Accepting payments for services rendered or products provided is an obvious aspect to every business. But choosing a payments platform can be overwhelming. We've highlighted key factors you should consider when selecting the best payments platform for your business.

6 tips to help Small Businesses get ready for Peak Season

The sun is out and visitors are arriving in their millions. We're gearing up for business owners favourite time of year.

Here's some simple ways you as a small business owner can make sure you're ready for season.

Top 8 apps for entrepreneurs

Apps can make tasks more convenient and save you valuable time. As a busy entrepreneur, we’re pretty sure that anything that makes your life easier is a big plus - which is why we’ve put together a list of 8 apps we think are incredibly useful.