Credit card fraud on the Internet has reached gigantic proportions, and the
merchants providing goods and services over the net are suffering tremendous
losses through chargebacks from the financial institutions who serve the
targeted credit card holders. Internet fraudsters are becoming wiser and more
sophisticated. Merchants who offer products or services online may suffer the
risks of not only losing the products cost sold online, but the added chargeback
fees, and the possibility of having their merchant account terminated by their
financial institution, if having lots of chargeback cases. Therefore, strategic
actions must be taken to effectively cope with the fraud cases. According to the
statistics shown in the 13th annual survey provided by Cybersource®, merchants
reported losing an average of 1.0% of total online revenue to fraud and that is
about $3.4 billion revenue loss, in year 2011.
Nothing is perfect; in this article, we share a few tips and advices for
Merchants to minimize the risks of credit card fraud cases, and to protect their
business sales. 1. Review and validate the order details Process only if the
order is completed with legit information, e.g. company name, full address,
contact number and etc. Be wary of unusual large orders as well as those orders
that shipped to a single billing address but transacted with multiple credit
cards. Besides, be extra cautious of multiple transactions made with the same
credit card number.
2. Geolocation by IP address, shipping country and billing address Make sure
the country derived from customer’s IP address is similar to the country given
in the billing address. By using fraud detection services or geolocation tools,
you can easily find out the country of the customer’s IP address who placed the
orders. Check also if the order is coming from "High Risk” country. Pay more
attention if the credit card or the shipping address is in an area prone to
credit card fraud.
3. Background search on the customer’s company Web site Try to visit
customer's Web site, whenever possible. In most cases, you can easily guess the
customer’s website by appending the www prefix to the given email address. Check
if the contact information published in their website matches with the details
provided in the orders.
4. Check whether a free email address was used There is a much higher
incidence of fraud case originated from free email services, as it is easier and
faster for the fraudsters to register multiple free email addresses for their
malicious activities. Hence, it will be safer to send an email to confirm
customer identity by asking them to supply additional information, as well as to
provide their ISP or domain based web address (if they are in business).
5. Check whether an anonymous proxy server was used When you think about a
proxy server, ‘anonymous browsing’ may be the first impression strike out your
mind. Originally, it was introduced as good for the legal usages. However, it
has been turned ugly by fraudsters who use it to perform malicious activities
behind the scene. The common trick play out was forging the IP addresses, so
that they can hide their true location and identity – anonymous. And, you may
not even know if they are behind the proxy because it looks perfectly ordinary
like a normal browsing. In order to dig them out from the ground, you need a
tool from a 3rd party provider, i.e, FraudLabs™. They provide a hassle free
method to keep the always up-to-date anonymous proxy server list as web service.
6. Check the phone number Fraud orders rate is usually higher when the orders
were found with invalid ZIP Codes or mismatch between the ZIP Codes and Area
Code. Try to determine and match the telephone area code to a postal ZIP Code by
using some other third party services.
7. Compare the credit card issuing bank’s country with the billing address
country Another key point to bear in mind is to check the issuing country and
the billing address. Make sure the issuing country and billing address country
are the same. This is especially important, because minor banks may not have
rigorous identification procedures.
8. BIN check and contact the credit card issuing bank for further
verification The issuing bank phone number is based on the first 6 digits of
credit card number known as the Bank Identification Number (BIN). It is useful
to determine if the credit card holder and the issuing bank are located in the
same country. If the order looks suspicious, just pick up the phone and confirm
the customer’s identity. This is to ensure the right person have the right card
to make the valid purchase.
Managing online fraud continues to be a significant and vital task for
merchants of all sizes. Although it is something that can never be completely
eliminated, but rather something that must be managed. One of the most important
factors in managing the online fraud is the implementation of security measures
that can adapt to the level of risk in each transaction. Applying fraud
detection web services such as FraudLabs™ supplies in the order management can
greatly reduce credit card fraud. This article discusses on preventive methods
and management of online fraud.
For more information about the FraudLabs™ Credit Card Fraud Detection Web
Service, please visit http://www.fraudlabs.com or email