Fraud Screening and Detection

Some of the most frustrating problems for an internet merchant can be credit card fraud and charge backs. If these issue becomes bad enough, one might end up with substantial losses that cause significant amounts of damage to their business. Ecommerce poses fraud risks due to the anonymity of shopping online. However, as technology has improved, so have the fraud screening and detection programs that work to fight internet crime.

Before a credit or debit card can be processed, the information must be authorized by a payment gateway. Payment gateway services utilize a variety of fraud prevention techniques that help to ensure the buyer is authorized to use the credit card and a charge back will not occur as the end result.

Address verification is one of the primary methods used to detect fraud. Consumers must enter their billing address upon purchasing goods or services to ensure that they actually are who they are presenting themselves to be. The address is verified by communicating with its issuing bank. Upon verification, the transaction will either be approved or denied depending on whether or not the addresses matched up. This concept is based on the ideal that an identity thief is not likely to know the billing address for the card.

In addition to address verification, credit card companies and payment gateways use CVV2 numbers to screen for fraudulent activity. A CVV2 number is the three to four digit number located on the back of the credit card. This works to minimize fraud because few criminals who make online purchases have possession of the physical card.

Another method for fraud detection is by IP verification. Each order processed from an ecommerce site should contain IP address information in order to identify the location of the consumer. If an IP address traces back to a location that is out of the country, yet the buyer has given a U.S. billing address, there is reason for alarm.

Identity theft is a rapidly growing crime in the United States. However, by using the most advanced fraud detection and screening methods, you can reduce the amount of damage it may cause to your business.

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