Best Practice on Credit Card Fraud Prevention for Merchants
Small businesses are at greater card fraud risk than larger companies with fraud prevention programs in place. With sustained due diligence, however, small business owners can greatly minimize their chances of payment card fraud.
eCommerce Fraud Detection
All eCommerce transactions are regarded as card-not-present transactions. As a result, these card transactions have a much higher fraud risk. These five strategies will help eCommerce retailers minimize the chances of online payments fraud.
1. Require card security codes
Credit and debit cards contain three-or four-digit security codes on the card’s reverse side. These numeric sequences are known as CVV or CVC codes. Merchants should always require this code when completing a purchase. If the customer does not provide this information, the eCommerce software will decline these card transactions.
2. Utilize the address verification service
An optional address verification service (or AVS) can help merchants to complete the card validation process. The AVS verifies that the customer card’s on-file billing address matches the entered address. However, a recent customer address change can cause a mismatch and a declined transaction.
3. Look for matching credit card and IP addresses
Every eCommerce order originates from a public Internet Protocol address (or IP address). The IP address displays the purchaser’s city or global region. If this designator does not match the credit card address, the merchant should decline the transaction.
4. Insist on a physical shipping address
eCommerce merchants should avoid shipping to a non-physical address such as a P.O. box. In addition, online retailers should decline to ship to a freight forwarder’s address. These addresses will include a container number in the address field.
5. Use tracking numbers for all shipments
Online retailers should use a tracking number for every shipment. This number ensures the package’s delivery to the designated address. This method helps to reduce claims from customers who say they never received the package.
In-Store Fraud Detection
Brick-and-mortar merchants can use multiple tactics to reduce credit card fraud risks. First, the development of EMV chip cards reduces the chances of in-store transaction fraud. These five credit card fraud prevention tactics will also reduce card-present transaction risks.
6. Adhere to payment processing guidelines
Every merchant’s payment processor and credit card company will provide specific transaction guidelines. Merchants who do not follow these rules may have their merchant account frozen or canceled.
7. Decline all damaged cards
Merchants should beware of customers who say their card is unreadable. Fraudsters often damage the cards so the merchant will manually process their transaction. The merchant should request another form of payment or decline the transaction.
8. Insist on card security codes
Each customer must enter the three- or four-number card security code from the card’s reverse side. This sequence is known as a CVV or CVC code. The code’s correct entry shows that the card is valid. However, this matching entry does not verify the cardholder’s authorization to use the card.
9. Maintain real-time authorization capabilities
Merchants should pay for the optional real-time authorization service. This ensures that the card number is valid and there is no report of a stolen or lost card. However, this report does not say whether the customer is authorized to use this credit card or debit card.
10. Do not tolerate customer bullying
Fraudsters may try to intimidate the merchant into processing their card transaction. Merchants can decide to refuse service to that customer.
What is Credit Card Fraud?