A recently released research report conducted by Javelin Strategy & Research has revealed that small business owners are at increased risks for credit card fraud. The type of fraud in particular which is disproportionately affecting small business owners is also associated with identity theft. According to the report, small business owners have a fraud rate which is almost double that of non-business owners (at 8.8% compared to the 4.7% fraud rate of non-business owners).
Titled “2012 Identity Fraud for Small Business Owners: PayPal and Alternative Payments Poised to Change SMBO Payment Landscape,” the in-depth report examines why small business owners are at risk for increased identity theft and steps which can be taken to reduce fraud risks.
Risk factors for small business identity fraud uncovered through the report include:
- Small business owners who do not maintain completely separate business and personal accounts can increase their fraud risks.
- Identity theft may be missed from the start because only 38% of small business owners examine business transactions themselves every month.
- A relatively small number of small business owners – only 18% – reported protecting their computers with antivirus software targeted for business applications. Computers which are not protected will increase risks for malware viruses which can gain access to business accounts and information.
- Some identity thefts can occur from poor hiring practices. Just 5% of the small business owners surveyed reported conducting background checks on potential employees before hiring.
- While credit card identity fraud can occur through a variety of avenues, a high number of small businesses seem to be exposing themselves to increased risks for identity theft through everyday business practices.
Small businesses can immediately reduce their vulnerabilities to fraud by maintaining separate personal and business accounts, reviewing transactions on a monthly basis, installing comprehensive antivirus software on all computers and conducting full employee background checks.
Banks and institutions which handle financial transactions for small businesses are also working to reduce fraud risks for their clients caused by data breaches.
The report also found that an increased number of small business owners are beginning to use alternative payment systems too which can offer a high level of information security. Current alternative payment methods which small businesses can utilize include systems through PayPal and Bill.com. Additional companies are working to develop their own alternative payment systems that can offer small business owners more options for secure credit card transactions.
In the future, small businesses may increasingly turn to alternative payment systems – instead of utilizing traditional banks – which are continually being developed to meet the unique security needs of small business transactions.
Javelin Strategy & Research. “2012 Identity Fraud for Small Business Owners: PayPal and Alternative Payments Poised to Change SMBO Payment Landscape.” (06/2012).
Kate Rogers. “Small Businesses Increasingly Victims of Credit Fraud, Survey Finds.” (07/11/2012). FoxBusiness.