What Is an Acceptable Risk for Online Payments?

This blog was originally published by TokenEx here.

Written by Valerie Hare, Content Marketing Specialist, TokenEx.

If your business handles online payments, there are risks associated with this. These risks include everything from chargebacks and fraud to data breaches and payment declines. With more consumers choosing digital payments, it’s essential to understand the risks of accepting debit, credit, and prepaid cards. Keep reading to learn more about risk management regarding online payments.

What You Need to Know about Online Payment Risks

Acceptable Risk

While it would be ideal not to have any payment risks, this is not possible. Instead, businesses should accept a reasonable risk threshold and tolerance level. Indeed, this is a crucial part of maintaining a successful company. By understanding your risks, you can make more strategic decisions that are less likely to jeopardize your organization.

Risk Tolerance

Risk tolerance refers to the acceptable minimum and maximum risk levels that a business can handle. This is typically defined by the company’s risk management team, which is approved by leadership. Businesses use these guidelines to determine which payment risks they are willing and not willing to pursue. By setting these limitations, companies can make smart decisions regarding online payments. As a result, this can help organizations maintain positive relationships with new and existing customers, grow their business, and mitigate financial losses due to payment declines, chargebacks, and more.

Risk Threshold

Risk thresholds are tools used to influence levels of uncertainty and impact regarding a business. Indeed, these tools can help define and determine the amount of risk that a company is willing to accept. An example of risk threshold would be rules to trigger different actions based on specific transaction scenarios for online payments. For example, a customer that places several orders with new cards within a short timeframe may indicate a fraudulent card testing scheme. In this scenario, a risk threshold rule can trigger a red flag warning to the business and set the orders as pending until the transactions are confirmed as valid with the cardholder or issuer.

Reduce Your Online Payment Risk with Payment Tokenization

Aside from establishing acceptable risk levels, what else can businesses do to reduce online payment risks? Payment tokenization is an effective security solution that replaces sensitive payment data with randomly generated sets of numbers called tokens. Sensitive payment data includes credit card numbers, bank account numbers, contact information, among others. Tokens usually have thirteen to nineteen alphanumeric characters and can be stored and accessed in an organization’s internal systems, while the original payment data is stored outside of the organization’s systems. Thus, this shields the organization from risk.

In the event where a business suffers from a data breach, the tokenized sensitive data will not be compromised. Thus, cybercriminals will not succeed at stealing or exposing any customers’ payment information. For businesses, tokenization can significantly mitigate online payment risks by preventing that data from being used maliciously.

• Improved data security – tokenized data obfuscates sensitive information that could harm your business and customers.
• Maintain PCI compliance – any business that stores and accepts card information must meet PCI DSS compliance. Payment tokenization providers can reduce the cost and complexity of this task so that you can focus on other important business objectives.
• Improved Customer Trust – customers will be more likely to purchase your products and services if they view your online business as trustworthy and safe. This is essential because customers need assurance that you will protect their data, especially payment details.
• Improved Customer Site Experience – every business has different payment needs, which a reputable tokenization provider can meet. When customers can quickly, easily, and safely place orders, this helps create a positive site experience that leads to repeat, loyal customers. Ultimately, a business that protects its customers’ data from theft is the most important goal.