Credit Card Fraud Prevention - Advice for Online Merchants
Finding a fraudulent transaction on a credit card statement can be an extremely distressing experience for a card holder. However, credit card fraud has two victims – the person whose card details have been stolen and the merchant whom the fraudulent transaction was made with. When people think of this crime the second of these is often overlooked but fraud can also be stressful for the retailer, particularly in the case of small businesses, as ultimately they are the ones who will lose money. It is therefore essential, if you own or are thinking of setting up an online business, to ensure that you have strict measures in place to prevent credit card fraud. If a cardholder disputes the validity of a transaction the retailer must comply with the retrieval request from the bank – within the specified timeframe - and provide proof that it is a genuine charge. If they do not, or are unable, to do this a chargeback will be issued against them and the funds will be taken from their account and transferred back to the cardholder. This is much easier for off line merchants, as a swiped receipt will provide proof that the cardholder was present for a transaction. With the demise of signing receipts and the advent of chip and PIN, many disputed charges turn out to have been queried in error as it is now very difficult for fraudsters to commit their crime. Retailers who rely solely on cardholder not present transactions, such as those trading online, do not have this advantage but there are precautions that can be taken. First of all, it is advisable to request the cardholder’s CVC2 (Mastercard) or CVV2 (Visa) number when taking an order. This is the three digit code printed on the signature panel on the reverse of the card. If a fraudster has obtained someone’s card number, for instance from carelessly discarded documents, this will prevent them from carrying out a fraudulent transaction with your company, as to provide this three digit code the card would have to be in their possession. If the card has been stolen a fraudster will, of course, be able to provide both the card number and the CVC2/CVV2 number. A responsible merchant should take this into account and take advantage of AVS (the Address Verication System). This system allows the merchant to find out if the delivery address matches the billing address. A genuine customer will not always want the goods delivered to their home address, but it is always advisable that, for their first transaction at least, your company sticks to a policy of delivering only to the billing address to help prevent fraud. This policy can be relaxed for return customers, as if the initial order did not present any problems you can reasonably sure of dealing with the genuine cardholder in further none face to face transactions. For some merchants, the cons of restricting the delivery address to being the same as the billing address will outweigh the pros. If this is the case for your business there are further measures to take into consideration. For instance, exercise caution if the AVS check shows a domestic address, but the delivery address is foreign. This should especially be taken into consideration if the delivery address is in a ‘problematic’ country, such as Nigeria or Indonesia, where credit card fraud is quite prevalent. Not all orders made in these countries will be fraudulent but use your discretion and if you think it is necessary ask for additional identification from the customer. Do not be tempted to turn a blind eye and process the order anyway. Ultimately, this can result in a chargeback and you will have to pay back money that you may already have allocated for other business purposes. In looking out for suspicious transactions also be vigilant for orders that could be deemed ‘unusual’ such as surprising bulk buys. It may also be worth requesting that customers provide a business or company email address, rather than a free one (such as Yahoo, Hotmail, etc) which anyone can set up. These things alone will not identify a fraudulent transaction but they can be considered additional ‘red flags’ if you have other causes for suspicion. Technology is advancing all the time, and you should always stay aware of new or up and coming developments that could further help your company prevent fraud. In the meantime, the measures above will not completely wipe out online fraud, but you can greatly reduce the number of fraudulent transactions made on your website and the number of chargebacks made against you.
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