Minimizing e-Commerce Credit Card Fraud
Credit card fraud is one of the worst possible enemies for high risk merchants who do the bulk of their business on the Internet, or through mail and telephone orders. A cardholder who is a victim of this fraud will normally only lose time when they declare a chargeback for a service or product they have not ordered; while the merchant is held responsible regardless. Reducing credit card fraud takes time, but high risk merchants need to first understand why and how these fraudulent transactions happen.
What is credit card fraud?
Online credit card fraud happens when the e-Commerce merchant is not aware that a placed order will not be paid for by the cardholder. Fraudulent card users will use credit card information that they have obtained illegally to order products or services under false addresses and names. When the correct cardholder receives the statement from the issuing bank, a chargeback is issued and the high risk merchant has to refund all of the expenses.
Credit card fraud causes real detriment to e-Commerce merchants In fact, studies have shown that these high risk merchants were charged over 500 million dollars in 2006 for chargebacks, not to mention the profit losses that come as result of lost goods and services. These losses demonstrate why it is so important to minimize online credit card fraud.
There are two ways to minimize fraud: gateway level and e-Commerce merchant level. The gateway level uses the security modules that credit card companies have instituted to reduce fraud, such as the AVS and CVV/CVC/CID systems. Some gateways will also use the Fraud Scoring System to generate automatic scripts that will let high risk merchants know the probability that the transaction in question is a fraudulent purchase. Another way to reduce fraud is at the merchant level. At this juncture, the merchant is able to minimize fraud by carefully analyzing all orders. Some online shopping card scripts provide statistical information that can aid in this process.
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