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How Clients Who Accept Mobile Payments Put You at Risk

How Clients Who Accept Mobile Payments Put You at Risk

Tech professionals who help their clients use mobile payment systems may be exposed to more liability risks than they realize. Find out how to defend yourself against the risks that mobile-enabled clients introduce.

Friday, January 10, 2014/Categories: cyber-risk-insurance

As many as 40 percent of small and medium-sized businesses are now accepting mobile payments (i.e., those from devices attached to tablets or smartphones), according to a survey conducted by marketing firm BIA/Kelsey. Within the next year, that number is expected to jump to 56 percent.

And mobile payments aren't the only way small-business owners are winning over clients via mobile devices. The survey also found that…

  • 72 percent are active on social media.
  • 32 percent are implementing some form of mobile advertising.
  • Two-thirds identify themselves as "very" or "extremely" engaged with customers on mobile platforms.

At first, this may sound like a feast of opportunity for IT professionals who serve small-business clients: as more people embrace mobile technology, more people will need your expertise to create apps, maintain their websites, and train their employees to use new technology.

But along with these tremendous opportunities to expand your customer base come several important (and potentially costly) risks. Here's a look at what those risks are and how you can prevent them from costing your business thousands of dollars.

Mobile Payments = Third-Party Cyber Liability Exposure for IT Professionals

Say a client comes to you for help building an app their customers can use to access coupons from smartphones. Or maybe they want a database to manage the customer data they're getting from mobile ads, emails, and other online features. Or maybe they simply need you to train their employees to use point-of-sale technology properly on their mobile devices.

You complete the job as laid out in your contract, get paid, and move on. All is good, right?

Not so fast. A few months after you complete the project, your customer gets slammed with a nasty virus. Turns out one of their employees failed to update the security software on his tablet regularly, and a virus got in, exposing thousands of client records (including credit card information!). (Think hacking won't happen to you? Find out why you're wrong.)

Your client has a heap of data breach recovery expenses to deal with, and they're not happy. They're looking for someone to blame, and unfortunately, your name comes up. The client sues and, even though you're confident that it wasn't your training or web design that let the virus in, you've now got to demonstrate that in a legal setting. Not fun.

If you have third-party Cyber Liability Insurance (aka Cyber Risk Insurance or Data Breach Insurance) in place, however, you don't have to worry about footing the bill for a lawyer from your personal assets. In fact, your Cyber Liability policy will also cover…

  • Settlements, in case your lawyer suggests it will be easier to settle with your client than go through a drawn-out court battle.
  • Judgments, in case you go to court and your client convinces the judge you were at fault for the breach.
  • Other court costs, including (potentially) hiring expert witnesses, paying docket fees, and more.

How much could you stand to lose? The average cost of a data breach in 2012 was $5.5 million, according to a Symantec study. While that's the cost that would hit your client, it gives you an idea of how much they might seek in damages in a liability suit against you.

Mobile-Enabled Clients = Errors and Omissions Exposure for IT Professionals

But the risks for IT contractors and small tech businesses helping clients go mobile extend beyond those associated with a data breach. Imagine, for example, that you're hired to train a small business's staff on their new POS system for smartphones and tablets. A week after your training session, one of the staff members accidentally erases important order information and botches several hundred customer transactions.

Or imagine that a mobile customer-rewards app you built for a client doesn't include proper disclosures about the information it collected. One of your client's customers gets angry about the information collection and writes a heated Facebook post about how terrible the company is. Unfortunately, the post goes viral and now your client is looking to recover some of the losses it will experience - and they turn to you.

If your client thinks professional negligence or oversights on your part caused them to lose money, they could sue you. And unless you have Errors & Omissions Insurance in place, you'll be responsible for paying all the related costs.

Asset Protection for IT Businesses and Contractors with Mobile-Enabled Clients

The bottom line? With every new opportunity comes new risks.

Take advantage of the growing popularity of mobile payment systems and rewards programs: serve the small-business owners eager to offer these technologies to their customers, and grow your business. But remember to invest in the proper liability insurance to protect that business, too, or else you could find yourself spending all your new revenue on defending yourself in court.

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