Preventing Online Credit Card Processing Fraud

Credit card fraud is a scourge for all merchants and their customers, but e-commerce businesses must be especially vigilant  

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Preventing Online Credit Card Processing Fraud

May 31, 2017

Preventing Online Credit Card Processing Fraud

Credit card fraud is a scourge for all merchants and their customers, but e-commerce businesses must be especially vigilant because they deal almost exclusively in riskier card-not-present (CNP) transactions. As an experienced payment processor, TSYS Merchant Solutions®takes any threat of credit card processing fraud very seriously. We also offer advice on ways to help keep personal and credit card data safe from fraudsters and identity thieves.

According to the 2016 LexisNexis® True Cost of FraudSM Study, U.S. merchants continued to experience increased fraud losses in 2016. On average, respondents reported an 8 percent increase in the cost per dollar of fraud losses over 2015.

For online businesses, credit card fraud typically involves data obtained illegally by fraudsters who then use it to place orders under false names or addresses. The deceit is usually not detected until well after the fact, when the legitimate cardholder receives their statement and contests the charge. The merchant is left holding the bag, suffering the expense of refunding all expenses and paying a chargeback fee.

Since all merchants that accept credit cards are potential fraud victims, all merchants should make PCI compliance their first line of defense. Being PCI compliant simply means your business practices meet the requirements of the Payment Card Industry Data Security Standard (PCI DSS). These standards help maintain a secure transaction environment and apply to all merchants who process, store or transmit credit card information. Your merchant services provider can help you attain and maintain PCI compliance.

Now for some fraud prevention tips that are specific to e-commerce. As previously noted, since neither the customer nor their payment card is physically present at the time of sale, CNP transactions are considered higher risk by credit card processors. (MOTO merchants who deal in mail order/telephone order sales fall into the same category.) Consequently, these merchants pay higher processing fees than a traditional retail merchant who handles card-present transactions, so they need to be aware of some red flags that may indicate that an online customer isn’t who they claim to be. Be cautious of:

  1. Orders from outside the country. International orders reportedly account for nearly 30 percent of all fraudulent transactions. Ask your merchant services provider for their list of countries that are considered particularly high risk.
  2. Shipping and billing addresses that don’t match. Often a thief provides the billing address that’s on file with the card issuer, but they want the order shipped to a different location. Make it a practice to ship only to the billing address.
  3. Larger-than-normal orders. Big orders can mean big headaches. If an order comes in that’s much larger than your typical order, or if it’s for large numbers of one or more particular items, be suspicious. Multiple items billed to multiple credit cards but all shipped to the same address may also be an indication of thieves at work.
  4. Very small orders. Some fraudsters place orders for very small amounts to test the validity of the card information they’ve stolen.
  5. Orders from an untraceable email account. Ask the customer to verify with an address that can be traced back to their location. If the customer is legitimate, they should appreciate the steps you take to safeguard them and you.

TSYS Merchant Solutions offers its merchants several anti-fraud services including AVS (address verification system) that cross checks card and personal information with information on file with the card issuer.

Talk to one of our trained representatives today about our online credit card processing solutions and the importance of taking a vigorous, proactive stance against online fraud to protect yourself, your business and your customers.

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