How Merchants Can Reduce Credit Card Fraud


If you operate a retail business or ecommerce business, the acceptance of all major credit cards and electronic checks is a mandatory method of payment. However, when you decide to accept electronic payments, business owners should also consider the potential cost of fraud. Studies have shown that traditional and online traders have lost billions of dollars in fraudulent transactions. Today, technology provides proven methods of identifying and preventing fraudulent transactions.

Fraud can take many forms. Needless to say, fraud is bad for business. If you process a fraudulent sales order when you discover that the credit card has been stolen, you have already shipped the product. Fraudulent orders usually result in charging your credit card to your business. Unfortunately, at that time, you delivered and lost your product, you lost the income from the sale and, to top it off; You will receive a chargeback charge from your credit card processor. I am sure we can agree that it is absolutely necessary to identify and stop a fraudulent order before delivering your product. Fortunately for the merchant, many steps and processes can be implemented to reduce and eliminate credit card fraud.

10 ways to reduce customer credit card fraud

1. Address Verification Service (AVS) – is a simple and easy process to implement to reduce your chances of accepting a stolen credit card. When you process a credit card transaction; Make sure you enter the billing address and the postal code of the cardholder. Manual transactions without dragging (Internet and MOTO) require you to capture cardholder information. However, card transactions (dragging) will not be. Once you have entered the billing address and the cardholder's postal code, you are ready to process the sale. Your point-of-sale system will check AVS with the bank that issued the card. You may receive a street address match only, a postal code match only, or a street address and postal code match. If you do not receive an AVS match, you should consider rejecting the transaction. About 80% of fraudulent transactions in the United States are AVS incompatibilities. Keep in mind that most AVS systems can be configured, so be sure to check your AVS settings. The implementation of AVS can have a major impact on reducing credit card fraud.

2 Checking the card (CVV / CVV2) – is similar to AVS. CVV is the 3-digit code on the back of a credit card (4 digits for American Express). Like AVS, CVV is entered at the point of sale. The CVV code of the cardholder is verified by the card issuing bank when processing the credit card sale. If you do not receive a CVV match, you should consider rejecting the transaction. Online merchants should make CVV a mandatory field.

3 Use a threshold management service – The management of the thresholds allows the merchant to define parameters for the transactions he will accept. For example, transactions can be filtered based on the amount of money charged per transaction, the number of transactions billed, the frequency of transactions, the average user ticket, and so on. Transactions marked as potentially fraudulent transactions will require additional review by the merchant. Threshold management services are generally available as a supplementary service.

4 Scrutinize Orders from Free Email Accounts Fraudsters and thieves like to hide. One of the easiest ways to hide the identity of a thief is to use a free email account. Most fraudulent transactions use a free email service. Merchants should not refuse all transactions from a free email service. However, you may want to provide these orders more carefully.

5 Check orders with a delivery address different from the one to which the address was sent – The thief with the stolen credit card can have the billing address and the postal code of the owner. If this is the case, you will receive an AVS and CVV correspondence on their order. However, in order to receive your product, they will request that the order be shipped to a different address. Merchants must review all orders bearing a different shipping and billing number. If the ship to contact is a foreign country, pay more attention to the order.

6 Control of international orders / foreign credit cards – If your business model requires you to ship to foreign countries, you must obtain an international merchant account. Since non-domestic orders have a higher fraud rate than domestic orders, an international merchant account will provide you with a higher level of protection. In addition, an international merchant account will allow you to pay in the local currency. If you need a national and international merchant account, you must use a payment gateway with load balancing. Load Balancing offers the merchant the ability to use multiple merchant accounts in a single payment gateway account.

seven. Understand that an authorization code does not mean that the credit card is not stolen – An authorization code is provided when the transaction has been approved. However, an authorization code simply means that the credit card is valid and has the available credit to process the transaction. In the end, as the owner of the business, it is up to you to decide whether to accept or reject the transaction.

8 Use an advance protection service against fraud – Advanced fraud protection services allow the merchant to block transactions by IP address, country of origin and other anti-fraud filters. Advanced fraud protection services are generally available as a complementary service.

9 Use a PCI-compatible data storage service Merchants who have the obligation to store the customer's credit card data must use a PCI-compliant data storage service. A PCI-compliant data storage service allows merchants to transmit and store the customer's payment information in a PCI Level 1 certified data installation. Once the customer record has been transmitted and stored in a secure manner, the merchant can then initiate remote transactions without having to directly access the credit card or electronic check information. This process is performed without the merchant storing the customer's payment information in their local database or payment application.

ten. Review and Implement PCI Policies (Payment Card Industry Standards) Merchants can view PCI standards online at If you use a PCI-compliant point-of-sale solution and do not store payment data, you are already in good condition. However, merchants must contact their merchant account provider for more information.

Fraud prevention is a necessary activity for traditional and online merchants. Exposing your business to fraudulent transactions and high chargeback rates is bad for your business and can cause you to lose your merchant account. The leading real-time payment gateway services provide advanced fraud protection tools. However, many fraud prevention techniques can be implemented without additional costs.

Main real-time payment gateway services

1. Planetauthorize (United States and International)

2. Authorize.Net (US domestic)

3. PlugnPay (Domestic USA)

4. Skipjack (United States)

5. Electronic Processing Network (United States)

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