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Avoiding credit card fraud through fraud detection and fraud prevention is essential in order to minimize risk and maximize profits.

Furthermore, new and advanced fraud prevention tools provided by payment gateway service providers such as for example are making it much more difficult for crooks to use stolen credit cards online.

Fraudulent prevention tools can help:

-Reduce cost by minimizing and preventing authorization and chargeback fees as well as possible inventory loss resulting from fraudulent transactions.
-Protect profits by maximizing real, legitimate transactions, rather than refusing those orders due to fear of potential fraud.
-Maximize flexibility by customizing filter settings according to your unique business needs.

-Restrict transaction activity from specific Internet Protocol (IP) addresses using IP tools.

Address Verification Service

Most, if not all payment gateway systems provide anti-fraud features called Address Verification Service (AVS).

AVS is an advanced fraud protection tool designed by bankcard processors to help spot potential fraudulent transactions before they take place.

AVS works by comparing the billing address and zip code provided by the ordering customer with the actual address and zip code that is on file with the card issuing bank. And if the address which the customer entered online does not match the actual address that is on file with the credit card bank then the transaction will be declined automatically by the AVS system.

AVS, Address Verification Service, also known as filters, can be customized to control how suspicious transactions are handled. And with such verification tools you’re given the option to approve or decline specific types of transactions or even place them on hold for further review and verification.

Fraudulent detection filters

There are many types of fraudulent filter tools which work together to evaluate transactions for indications of fraud. And their combined technology provides a highly effective defense system against fraudulent transactions.

Amount Filter sets lower and upper transaction amount thresholds to restrict high-risk transactions often used to test the validity of credit card numbers.

Hourly Velocity Filter limits the total number of transactions received per hour, preventing high-volume attacks common with fraudulent transactions.

Shipping-Billing Mismatch Filter identifies high-risk transactions with different shipping and billing addresses, potentially indicating purchases made using a stolen credit card.

Transaction IP Velocity Filter isolates suspicious activity from a single source by identifying excessive transactions received from the same IP address.

Suspicious Transaction Filter (an Authorize.Net fraud protection filter) reviews highly suspicious transactions using proprietary criteria identified by Authorize.Net's dedicated Fraud Management Team.

Authorized AIM IP Addresses allows merchants submitting Advanced Integration Method (AIM) transactions to designate specific server IP addresses that are authorized to submit transactions.
IP Address Blocking blocks transactions from IP addresses known to be used for fraudulent activity.

Enhanced AVS Handling Filter is a standard feature of the payment gateway that compares the address submitted with an order to the address on file with the customer's credit card issuer. Merchants can then choose to reject or allow transactions based on the AVS response codes. AFDS includes an AVS filter that assists the decision process by allowing merchants the additional options of flagging AVS transactions for monitoring purposes, or holding them for manual review.

Enhanced CCV Handling Filter is a standard feature of the payment gateway as well. CCV uses a card's three- or four-digit number to validate customer information on file with the credit card association. Like the AVS Filter, the CCV Filter allows merchants the additional options of flagging CCV transactions for monitoring purposes, or holding them for manual review.

Shipping Address Verification Filter verifies that the shipping address received with an order is a valid postal address.

IP Shipping Address Mismatch Filter compares the shipping address provided with an order to the IP address of where the order originated from. This helps to determine whether or not the order is shipping to the country from which it originated.

Regional IP Address Filter flags orders coming from specific regions or countries. You can choose to customize the filter actions based on an entire geographic area, or select country by country how to process transactions flagged by the filter.

With advanced tools such as fraud filters you can protect your online business from fraudulent credit card transactions. However, it is also important to use good judgment as well.
Tips for avoiding credit card fraud

Fraud filter tools can help internet businesses avoid credit card fraud to a great extent, but there are plenty of checks that you can do to help prevent fraudulent transactions as well. Furthermore, it’s important to realize that not every transaction is fraudulent, even when certain aspects of the transaction don’t match or seem right such as in the case with a difference in the bill-to and the ship-to address.

For example, a customer may order a product online using their home billing address but may enter in a different address for the ship-to address, such as their work place for example. And many times, this may be the case.

The customer will not be home to sign for the package and/or they may have to use the product for work, and it’s more convenient for them to have the product shipped to their work place than to their home. And sometimes the customer would rather have the product delivered to their work place in order to avoid the product being stolen from their door step when no one is home to receive it, which happens more often than not in bad neighborhoods.

However, when in doubt, (for whatever the reason may be) you can always call the customer for further questioning and/or use Google to conduct further research on the “ship-to” address in order to make sure that the ship-to address is a genuine business location. Yet during the holiday seasons customers may purchase items online and have the items shipped to another home address instead of their own, such as in the case of buying gifts for others. But again, if the transaction is a purchase for a high ticket item with a shipping address that is different from the billing address then you can always call the customer for further proof and verification of the authenticity of the transaction in order to prevent any possible fraudulent activity.

There are other red flags to look for when trying to prevent credit card fraud such as phone numbers that are constantly busy or send the call straight to voice mail or a fax machine. All of these are possible indicators of credit card fraud.
Credit card fraud and international orders

It’s also important to use caution when receiving and processing international orders from customers online. If it’s a business customer or a known, repeat business customer with a genuine business location then there is a smaller chance for fraud. However, if you’re going to take and process international orders then you may want to implement strict policies before doing so. Or, you can refuse to accept international orders all together as well. That is entirely up to you.

You can also limit international orders to near by and/or safe countries as well. And safe countries can include countries such as Canada, United Kingdom, Ireland and Europe. Furthermore, you can set your “IP Address Blocking” filter to decline orders from unsafe, high risk countries such as South America, Central America, Africa, India and the Middle East.

You can request that all International orders over a certain dollar amount be paid by bank wire transfers only in order to avoid international credit card fraud.

You can also request that international customers fax or email you a copy of their credit card, (front and back) along with a copy of their drivers’ license as well in order to show that both signatures match.

The stricter your international order policy is then the less likely you are to receive fraudulent credit card orders. And if you are going to take and process international orders then be sure to have a section on your website detailing your guidelines and procedures for international orders.
Credit card fraud by credit card owners

Some times, the credit card owners themselves will commit fraud by purchasing a product online and then after receiving the product and their monthly credit card statement they will proceed to contact their credit card bank and report that specific transaction as an unauthorized charge.

They will simply call the card issuing bank and report the credit card as stolen or deny making the purchase completely. And in such cases, there’s not much that you can do other than to dispute the charge by providing all details for the transaction, shipping address, tracking number etc. Yet many times dealers lose such disputes and the customer ends up with the product, for free.

The international bank will proceed with the chargeback back causing your own merchant account provider to take those funds from your bank account and return them to the international card holder. And in the end, the business owner loses. However, don’t let this trouble you. You can still proceed to take international orders and national orders as well yet all the while doing so with extra caution using fraud protection filters and good judgment as well. And in this manner, you can avoid credit card fraud, minimize risk, and succeed online.
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