How To Minimize Online e-Commerce Credit Card Fraud

Credit card fraud – a cardholder’s and an e-Commerce merchant’s worst possible enemy when it comes to online credit card processing, MOTO (mail order/telephone order) processing and other card-not-present types of e-Commerce. While cardholders just lose some time declaring a chargeback for a service or product they have not received, and have not intended to order, e-Commerce merchants are held responsible in any case when it comes to fraudulent credit card transactions.

Dealing with online credit card processing fraud may be frustrating and that is why, a responsible eCommerce merchant account provider interested in the flawless e-Commerce process of each and every client using their e-Commerce merchant services, does all it can to provide up-to-date information on anti-fraud security, tips and hints, and more.

Minimizing credit card fraud takes time, but before attempting to minimize fraud e-Commerce merchants must understand why and how fraudulent transactions take place.

What is an online credit card fraud? A fraudulent transaction (also known as credit card fraud) is a kind of transaction where an e-Commerce merchant is unaware of the fact that a placed order will not be paid for by the cardholder. Typically, credit card information is gained illegally (i.e. stolen, traded, carded, etc.) by fraudsters, who use this information at e-Commerce resource to order merchandise or services under false names. As soon as the original cardholder receives his/her statement from the issuing bank a chargeback is issued and the e-Commerce merchant has to refund all the expenses, and cover the hassle by paying a chargeback fee.

Some statistical data shows that e-Commerce merchants around the world were charged more than $500,000,000 in chargeback fees in 2006. And that is not taking into account the dramatic losses in profits due to irretrievable goods shipped and services rendered. That is why it is so important to learn how to minimize online credit card processing fraud.

An e-Commerce merchant can use techniques to minimize fraudulent transaction on two levels: on the gateway and e-Commerce merchant account level, and on the e-Commerce merchant level.

Gateway/e-Commerce Merchant Account Level:

Any online credit card processing payment gateway can be subject to hacker attacks. It is extremely important to acquire an e-Commerce payment gateway that is secure, and that uses SSL 128-bit encryption technology to keep any and all information safe and concealed.

Using supplementary security modules by Visa (3D-Secure module) and MasterCard (SecureCode module) proves to be of great help. Basically, these two features request an additional password, which has to be entered along with the credit card details of the cardholder. Fraudsters (people who specialize in online CNP fraudulent credit card orders) will usually have the name, address and credit card number only. fully supports Visa’s and MasterCard’s security modules and has integrated their functionality in their e-Commerce merchant account services.

Online credit card verification systems – AVS and CVV/CVC/CID – are used to provide additional security at an early stage. CVV/CVC/CID are basically the same thing, except that they are systems designed by different credit card companies. These systems use a special 4-digit PIN code to verify the fact that the credit card is in the hands (the code is imprinted on the back of the credit card) of the person placing an order.

AVS is a different kind of security feature. AVS stands for Address Verification System. AVS is a service provided by credit card companies which lets e-Commerce merchants verify the addresses of credit/debit cardholders (for US issued credit/debit cards only). While AVS is automatable, and can be integrated to work along with the gateway as a module service (if the processing company supports this feature), it can also be used by the e-Commerce merchant by calling this number: Visa/MasterCard 1-800-228-1122 [AVS].

Fraud Scoring Systems (FSS) are automatic scripts that generate a fraud score, i.e. the chances that a placed order is a fraud. The fraud score is generated automatically from a customer’s (or fraudster’s) online data and submitted data, such as: location, shipping address different from cardholder’s address, relative to location time, IP address, contact detail specifics, and others.

The e-Commerce merchant account itself is a very important factor when it comes to online credit card fraud. Having a merchant account which is not able to provide substantial security and support by the provider is like having no e-Commerce merchant account at all. The best e-Commerce merchant service providers will always make their best to provide maximum security, stability and will be there when an e-Commerce merchant faces fraud.

Using real-time verification services ensures that credit cards are verified ‘on the spot’. It takes 5 seconds for the gateway to check whether a specific credit or debit card has been reported stolen or lost.

e-Commerce Merchant Level:

e-Commerce merchants are perfectly able to minimize online credit card processing fraud by simply analyzing all the orders. e-Commerce payment gateways and online shopping cart scripts provide statistical information.

By analyzing the time of purchase, the location, the shipping details, and the contact details an e-Commerce merchant can get the idea of what a fraud might look like. For example, what normal cardholder would place an order at 4 A.M. (cardholder local time; time zones must not be neglected)? Comparing the personal details of the customer to the product or service that is being ordered is vital, too. A female in her 40’s is not likely to purchase a yearly membership for an adult content resource. Empty contact information, such as phones, middle names, security numbers should be a source of alert, as fraudsters seldom have access to all the personal information.

e-Commerce merchants should always manually verify placed orders before charging a card, that is why it is recommended to switch all shopping cart scripts and gateways to manual mode, or VT (Virtual Terminal) mode. Calling up customers (or placed orders arousing suspicion) in order to check if they really have placed an order. This will take only a few minutes, and international calls can be economized on using Skype.

There are many services which let e-Commerce merchants manually to some extent verify a credit card order for possible fraud. Some helpful resources are:

e believe that credit card fraud can be fought off with just a little knowledge. That is why we’ve provided some information on how to minimize online credit card processing fraud and hope that this information proves to be valuable. Fight credit card fraud with!

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