Merchant account forums

Definition and Impact: Fraud comes in many shapes and sizes and is committed by various individuals from petty amateur-thieves to professionals who make a living from it. When referring to online fraud we are predominantly talking about anonymous individuals making purchases through stolen of fictitious credit cards. As a result (and for example) the lawful owner of the card disputes the charge he/she didn’t make and you, the merchant, pays a chargeback fee. Fraud committed against your company and extensive chargebacks may well lead your merchant service provider to terminate your account.

Ironically it was the customer who laid victim to online fraud in the early days of e-commerce when merchants could happily accept online payment with next to no risk. Nowadays the role has more or less reversed. While the merchants must reassure customer security, they must take constant measures to protect themselves. With the right amount of caution the intelligent merchant will reduce fraudulent sales dramatically, if not entirely.

By implementing the following technical solutions, common sense and a degree of caution, fraud committed against your business (and the consequential chargebacks) will rapidly diminish.

Address Verification Service
AVS is provided by the majority of merchant service providers and is a must in terms of fraud protection. AVS is an automated service that authenticates a consumer by matching the order information to the cardholders billing address held by the issuing bank.

IVR Terminal
Interactive voice response terminals are used to capture a “voice stamp” (a recording of a customer’s voice) as a means of authorization and verification. Only when the customers voice has been captured forwarded and subsequently filed by the merchant, is the order shipped. Having an audio record of a customer not only puts off unauthorized cardholders but also gives merchants hard evidence that the order took place. Any bogus claims of unauthorized charges or failure to deliver can be rubbished.

CVC2 and CVV2
These are numerical verification codes consisting of three digits found on the backside of Visa and MasterCard credit cards in the signature panel. Requiring this number at an online checkout, in conjunction with other security systems such as AVS, ads another defence barrier against unauthorized parties.

When in doubt check it out!
If you are suspicious over an order for whatever reason then don’t hesitate to follow up the order with an email or phone call for verification. In most cases simply reviewing the order by checking all the required information is there and that it belongs to the customer, will confirm or relieve doubt. If contact, billing and shipping information do not match then be aware that that is a typical example of a fraudulent purchase, but it is by no means always the case. If the details work out and you are still uncertain IVR terminals and or a manual ‘quick call’ can smooth over any confusion.

Be Clear!
Its important to let customers know what name will appear on their credit card bill if it should differ from the online company name the customer is familiar with. If a customer receives charges to an unfamiliar company then they are most likely to dispute them.

Free Email Addresses
Be cautious of orders placed through free email addresses. Addresses that originate from free domains such as hotmail, yahoo, Gmail, gmx (just to mention a few of an endlessly growing list) are almost impossible to track back to an actual person. ISP (internet service provider such as AOL or BT) and personal domain based email addresses are much easier to trace back.

Note: If you are unsure whether an email address is from a free service then just type “www.” followed by the domain name into your browser to find out. It will either take you to the free domain name website or not.

Signatures
For businesses that make currier-based deliveries, require a signature on delivery and maintain it as a receipt that you fulfilled your side of the bargain.

Warning Messages
Simply stating that IP (internet protocol) addresses are being logged will greatly discourage amateur thieves. Essentially you are telling these people that you will track them down if they mess you around, but be sure to post such a message with a degree of subtlety as not to sound too defensive.

Essentially the more documented information you have on your customers from voice stamps to CVVC2/CVC2 codes the less likely you are to encounter fraudulent sales. Taking the time to check out suspicious orders, invest in software or personnel designated to fraud prevention and management can save your business a huge amount of money.