Payment Frauds and Chargebacks

  • Filter
  • Time
  • Show
Clear All
new posts

    Payment Frauds and Chargebacks

    Payment fraud refers to a fraud that takes place when fraudulent transactions are performed under a Credit/Debit card. It is mostly caused by the use of a counterfeit card with the customerís account number.

    In e-commerce, a charge back refers to the reversal of a credit card transaction. It is usually initiated by the card issuer upon the request of the card holder. The most common reasons of Charge backs are fraudulent and unauthorized activity on the card, customer disputes, and other authorization issues.

    With the number of online transactions being on the rise, payment frauds have increased drastically.

    So how does a Business Minimize Online Frauds and Chargebacks?

    Implementation of the below factors shall reduce / minimize online frauds.

    1) AVS:

    The AVS, or address verification service is a commonly used practice by most ecommerce websites. Thatís the reason why every payment page asks for your detailed address. The address acquired is matched with the address entered by the user with what the credit card company has on file.

    2) CVV:

    The CVV, which is the security number printed at the back of the card needs to be entered along with the other details of the card. Again, this will help prevent some frauds, but these CVV numbers are also easy to buy in the Internet fraud market. In addition to the CVV, adding a 3-D secure code to the credit or debit card can be an added security layer for online transactions.

    3) Payment Gateway:

    Options like, the Authorize at Sale, Capture at Shipping etc. for receiving credit card payments are marked as the Recommended and Most Secure options by the payment gateway. This option allows you time to review the details of each order before you collect payment or ship the order.

    4) IP Address:

    The IP Address is a clickable link which will take you to an IP look-up site and show you the geographical origin of the IP Address.
    For example: Order was placed ONLINE using IP Address

    Once you trace the location of the IP address, it can be compared to the order's Shipping/Billing addresses to see if they match. If they fail to match, then you can contact the customer to verify their payment and order information before proceeding further.

    5) Billing Address:
    Most payment processing gateways verify a customer's credit card number against the billing address they provide at checkout to make sure that the address matches with the address on file with the payment card issuing bank. There is a minimum amount of information that should match in order for the transaction to be approved.

    6) SSL certificate:
    An SSL certificate is a tool that ensures the safe communication of sensitive data (e.g. Personally identifying information and credit card numbers) between websites. This information is encrypted by the SSL while it is transferred between websites.

    7) Fraud Score:
    Fraud Score is a feature which checks incoming data for orders against a full database of fraud information to assign each order a score. Based on the score, you can see whether the risk on the order is: Low, Moderate, or High.

    Example: ďMaxMindĒ is an industry-leading provider of IP intelligence and online fraud detection tools.

    The above mentioned factors shall help detect and reduce frauds in online transactions. But hackers will still keep trying out new techniques to carry out payment frauds. Therefore itís advised to be very cautious while dealing with online transactions. Be extra cautious with bulk orders and orders from embargo countries. Thereafter we should also keep updating our online billing software to keep it free from bugs and hitches. As the saying goes, ďA stitch in time saves nineĒ.

    Re: Payment Frauds and Chargebacks

    Very informative post in terms of working of the online payment card industry & it's data security standards.. Thanks for posting!
    Rock _a.k.a._ Jack Daniel

    Follow eUKhost on Twitter || Join eUKhost Community on Facebook


      Re: Payment Frauds and Chargebacks

      Online transactions are fast, but not reliable nowadays because of intruder attacks and malicious activities. One should take all the necessary steps before making any payment online.


        Re: Payment Frauds and Chargebacks

        Hence for the Merchants, it’s recommended to use Maxmind-Fraud Detection services however one can’t rely on it completely.

        It’s equally important to identify the Card testing of the Customers. AVS/CV2 checks must be enabled, that means when data is sent to the Bank it will perform checks on the address and postcode to see if the card is registered at the billing address. Bank does not check the amount of charge backs, they particularly check on the counts which further results into reserving your funds. Few payment gateways suspend ability to accept credit card payments hence merchants should be careful while accepting the Online Payments especially via credit card.