Credit Card Fraud

Cybercrimes such as credit card fraud are kept on raising in this digital Era since selling and buying process over online dramatically increasing. Selling goods exclusively over the internet is not as easy as it sounds. E-commerce merchants always need to be prepared for certain unexpected situations, such as losing their products and having to pay the shipping charges and chargeback fees. However, the primary risk with online transactions lies via payment gateways.

People store and transfer confidential information during online transactions such as authentication information, passwords, and financial information. If frauds and scammers can get their hands on this information, then it poses a major threat.

In 2017, the number of losses was $5.3 billion, which is predicted to be $7.2 billion in 2020. While giant tycoons are also affected by this huge loss, small businesses can end up on the brink of destruction.

ACFE’s report of 2016 has displayed that the median loss suffered by the smallest and largest organizations are the same, though obviously small companies will face more difficulty dealing with fraudulence. So, it is hugely important for small companies to enhance the security of their businesses, but how?

Sarah Grayson, from McAfee’s web security team, recommends that merchants should use firewalls to add an extra layer of security to their online transaction. From the website to web applications like search queries, contact forms, and login boxes, everything must be protected with high-level security.

It will prevent application level attacks such as Structured Query Language (SQL) and cross-site scripting (XSS). When you use credit card fraud detection tools, it eliminates any type of vulnerability during the payment process. 

However, it’s important to first understand what credit card fraud is and how it can harm your business. Only then can you detect and prevent fraudulence with the help of anti-fraud tools provided by your payment gateways provider. 

Basics of Credit Card Fraud

Credit Card Fraud

Credit card fraud occurs when a credit card is stolen or lost, or the card number and pin are used for unauthorized transactions. For an unauthorized transaction, a company needs to pay interchange rates, markup fees, and assessment fees. 

Other potential consequences are:

  • Lost Revenue and Resources: Apart from paying the shipping charges for lost materials, you will also need to contact customers for verifying suspicious transactions which will waste a lot of your time, money and effort.
  • Chargeback: There is a fee that you will need to pay for every transaction that is disputed or fraudulent.
  • Account Termination: This may also lead to the termination of your merchant account if the percentage of chargebacks exceeds the revenue processed by a certain value.

Security Tools that May Help in Detecting It

You need to choose a payment gateway that can secure your business by reducing losses and dealing with card payment fraud with the help of the most effective techniques.

The most important tools against credit card fraud are:

Verification: When the identity/authenticity of the user is verified, it is easy to block fraudulent transactions. 

You can have yourself verified using these tools:

  • Address Verification: There are two types of address verifications you can use. One is your zip code, and the other is the billing address. During a transaction, if these two addresses do not match, then the bank can flag the transaction.
  • Card Verification Code: The card verification code (CVV) is printed on the back of credit and debit cards and is a 3 or 4-digit code. This code is not stored in a database, but you need to enter it for any kind of transaction. Without the CVV codes matching, the payment gateways will block the transaction.
  • Screen with Device Identification: Instead of the users, this identification is for analyzing the devices being used for the transaction. All devices including a computer, tablet, and phone have a unique device fingerprint just as every person has their own unique fingerprint. It also helps in detecting risks in the transaction.
  • Blacklisting: When an entity has identified as a fraud, it can be blocked completely by blacklisting. You can block customers by their names, addresses, email addresses, credit card information, or even countries. For example, Malaysia, Russia, Israel, Ukraine, Nigeria, Bulgaria, Yugoslavia, Lithuania, and Romania are marked for the highest online fraud rates. So, you need to be extra careful while shipping items to these countries.

Monitoring Irregularities: Certain security tools help you to identify fraudulent transactions and flag or block them. 

You can choose:

  • Limit Amount for Transactions: Fraudsters tend to make large transactions so that they can steal the maximum money before the valid uses get his card blocked. You can prevent it by limiting a specific amount for your transaction. For adding extra security, you can also limit the number of failed transactions allowed for a customer on your payment gateways. 
  • Conduct Velocity Checking: A velocity attack is referred to using software for generating numerous card numbers and running them on a website until a valid number is found. You can identify this attack by checking the number of transaction attempts of a customer. There is also a lockout mechanism that you can use to prevent automatic card number generating programs. 

User Authentication: If the identity of a user is confirmed during online transactions, then the process will be free of fraud. 

  • Payer Authentication: Payer authentication is a cardholder authentication. A PIN or is generated during an online transaction to confirm the identity of a user. The codes are ‘Verified by Visa’ (VeB) for Visa cards and SecureCode for Master cards. If the wrong PIN is entered, then the transaction is blocked immediately.
  • Evaluate with Risk Scoring: By viewing several components of a transaction, the tool can detect fraudulent transactions. You have to evaluate the results of the customers’ transaction verification tools like device ID, AVS, CVV etc. You also need to check the place of the purchase as well as shipment. You must decline the shipment if you find too many disputes. 

The best decision you can make as an eCommerce merchant is choosing a payment gateway with built-in fraud prevention tools. It will save you time and help to have safer transactions. In some cases using an ACH Payment Gateway can offer another payment acceptance tools and risk mitigation.