Credit card fraud has two victims – the merchant whom the fraudulent transaction was made with and the person whose card details have been stolen. When you think of this crime the first of these is often overlooked. Well, the fraud can also be very stressful for the merchant, predominantly in the case of small businesses, as in the end, they are the ones who lose their money. Hence, if you own or are planning to set up an online business, it is essential to ensure that you have all the measures in place to prevent credit card fraud.
In case a cardholder disputes the validity of a transaction, the retailer or merchant should comply with the recovery request from the bank – within the particular timeframe – and give proof that it is an authentic charge.
In case they don’t or fail to do this, a chargeback will be issued against them and the all the funds related with that particular transaction will be taken from their account and transferred to the cardholder. There are some precautions that can be taken.
Firstly, it is advisable to request the cardholder’s CVV2 (Visa) number or CVC2 (Mastercard) when taking an order. It is the three-digit code that is printed on the signature panel on the backside of the card. If a fraudster has obtained someone’s card number, this will prevent them from carrying out a fraudulent transaction with your company, as to provide this code the card needs to be in their possession.
However, the card has been stolen; the fraudster will be able to card number and the CVV2/ CVC2/ number. In such a scenario, a responsible merchant must take advantage of AVS (the Address Verification System). This is a system that allows the merchant to discover if the delivery address matches the billing address. An authentic customer will not always want the items delivered to their house address; however, it is advisable that, for their very first transaction at least, your company must stick to a policy of delivering only to the billing address so that you can prevent fraud.
For a few merchants, the cons of restricting the delivery address to being the same as the billing address will overshadow the pros. In such a case, there are further measures to be taken into consideration. For example, exercise caution if the AVS check shows a domestic address, but the delivery address shows overseas. This should particularly be taken into consideration in case delivery address is in a ‘problematic’ country, where credit card fraud is pretty common. Don’t be lured to turn a blind eye and process the order. Eventually, this can result in chargeback and you will be forced to pay back the money.
When you look out for suspicious transactions, be watchful for orders that could be deemed ‘unusual’ such as unexpected bulk purchases. It is also worth requesting that customers provide a company or business or email address, rather than a free one (such as Hotmail, Yahoo, etc) which anybody can easily set up.
So keep these tips in mind and you can to a great extent reduce the number of fraudulent transactions made on your website and the number of chargebacks made against you.