Fraud is alarmingly common and on the rise in Canada. As of May 31, 2024, the Canadian Anti-Fraud Centre reports that $241 million was lost to fraud compared to $569 million in 2023.

Small businesses and independent professionals, particularly those utilizing point-of-sale (POS) terminals and software for financial transactions, are susceptible to fraudulent activity.

Various industries, including retail stores, hospitality businesses, food and beverage establishments, health and wellness facilities, service providers like beauty salons and barbershops, and auto repair shops, are among those that rely on POS systems for customer payments.

While a comprehensive business insurance policy can aid in recovering from fraud-related losses, it’s crucial to take proactive measures. These steps can significantly reduce the risk of your business falling victim to fraud.

Business POS System Fraud

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5 POS Fraud Prevention Tips

Here are five ways to reduce the risk of fraud involving your business’s point-of-sale (POS) system:

1. Monitor Customer Behaviour

Face-to-face fraud occurs during in-person transactions in your shop or store. It involves a fraudster interacting with you or your employees in your workplace instead of online or on the phone. The good news is that in-store scams can be prevented.

Be mindful of suspicious customer behaviour. For example, if a customer appears nervous, seems to grab products to buy randomly, or wants to purchase a large, expensive item. Also, take note of how many times someone enters a card’s PIN if they keep getting it wrong, and ensure your customers use chip cards versus swiping when paying for goods. 

2. Use Strong Passwords and Limit Access to Your POS System

Use complex passwords to sign in to your POS system and change them regularly. Also, only authorize a limited number of employees to access the device.

Furthermore, keep your POS system’s software up-to-date and enable end-to-end encryption for all transactions.

3. Safeguard Where Your POS Equipment Is

To minimize the chances of falling prey to this type of fraud, you must be vigilant and ensure your POS system has not been tampered with or compromised. 

Watch for people hovering around your POS device. Keep your POS system out of reach, secure it to your counter or service desk with cables to prevent someone from swapping your machine with another one, and install surveillance cameras around the area where customers make payments. 

4. Train Your Employees on POS Equipment Tampering

Help your frontline employees protect your business by training them to recognize the signs of POS equipment that have been tampered with and ensuring they verify any POS equipment service and repair technicians who visit your store.

5. Secure Your Store’s Wi-Fi

Never use public or unsecured Wi-Fi networks with a POS system. Ensure your store’s Wi-Fi is password protected with a strong, complex password that is not shared with customers or employees, and frequently change the password. It’s also worthwhile to install firewalls and antivirus software to protect your network.

What Type of Business Insurance Covers POS Fraud?

Fortunately, there are four insurance options that can be added to your policy to provide coverage for losses or liabilities associated with your POS system, including:

  • Cyber liability insurance: Cyber insurance covers losses caused by a cyber-attack or data breach on your business, including attacks on your POS system. It’s designed to help your business recover quickly by providing funds for legal advice, software restoration, notification fees, and credit monitoring expenses for affected customers.
  • Commercial crime insurance: Commercial crime insurance exists to cover your losses due to theft, including internal theft by employees, such as fraud, dishonesty, forgery, and electronic crime. It also covers third-party fraud or theft, including burglary and robbery, committed by people who are not your employees.
  • Errors and omissions (E&O) insurance: E&O insurance, or professional liability insurance, covers claims of professional negligence, mistakes, and failure to provide a service as promised. In the context of POS fraud, E&O insurance can help cover you if a fraudulent incident results in legal action against you by customers alleging you failed to protect their confidential information adequately.

How to Get Low-Cost Insurance to Protect Your Business

Zensurance is Canada’s leading small business insurance provider serving hundreds of thousands of business owners and independent professionals annually.

We pride ourselves on helping protect the backbone of the Canadian economy – small businesses – secure their financial wellness with low-cost, customized insurance.

Fill out our online application for a free quote. Our knowledgeable brokers will shop over 50 insurance providers on your behalf to find the policy you require, answer your questions, and ensure you’re adequately protected from the threat of fraud and other unexpected incidents that can upend your business.

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About the Author: Brandon Bowie

Brandon Bowie is a Team Lead, Professional Lines at Zensurance.