- American Express & Discover Card
- CISP Certification
- Discount Rates
- Electronic Checks
- Fraud Screening
- High Risk Merchant Accounts
- How Transactions are Processed
- Keyed Transactions
- Merchant Account Fees
- Offshore Merchant Account
- Payment Gateways
- Reasons for a Merchant Account
- Select a Merchant Account Provider
- Terminated Merchant File
- Third Party Processing
- Types of Merchant Accounts
- Understanding AVS
- Understanding Chargebacks
- What is a Merchant Account
Fraud Screening
As more and more ecommerce merchants utilize merchant accounts and credit card transactions to receive payments from their customers, there is more opportunity for fraudulent use of credit or debit cards to occur. At the same time, merchant account providers recognize the importance not only to protect the merchant from fraudulent transactions, but to protect the customer from transactions which put them at risk as well.
When the merchant accepts the payment information that the customer has submitted using a credit or debit card and releases the product to the customer, the merchant assumes that adequate checking and safeguards against false identify or credit card theft or other unauthorized use has occurred. The merchant has no way of knowing that the customer who owns the card is not the one who has used the card to receive the product. By the same token, a legitimate customer who uses their credit card to purchase something from a merchant website has the right to expect that the payment information submitted to the merchant got to the right place and nowhere else.
Fighting fraud and chargebacks for the merchant service provider is expensive. For the merchant, shipping an item in good faith and then receiving a notice that there is a chargeback because of an unauthorized purchase using the customer’s credit card means time spent providing proof of shipping and documentation of orders.
For the customer, unauthorized charges on a credit card bill can be devastating. Not only does it require a great deal of time and energy to document the fraudulent purchase, but in the meantime, interest amounts for unpaid balances can escalate to the point where an account is frozen.
Some of the methods which are being used to combat fraud include: use of a Cardholder Verification Value. This three digit number found on the rear of the card when entered into the online shopping cart proves that the card is in the possession of the person entering the card number and CVV. This means that an unauthorized user cannot use a credit card number randomly to purchase an item. The card must be physically present in order to key in the CVV.
Another protection for the customer is the creation of Personal Identification Number which is known only to the owner of the card. The PIN created by the customer must be entered correctly into the order form or the purchase transaction is denied. This feature would prevent an unauthorized user from going online with a stolen card and attempting to use it to purchase big ticket items without having the correct PIN number which is easily identified by the card issuing bank.
Merchants prefer to have bad sales stopped before they happen; rather than to go through the chargeback process. Excessive chargebacks are responsible for high rate merchant accounts and for sometimes closing down the merchant account completely.
It’s important to have fraud screening tactics installed so that they work in real time. The fraudulent order needs to be stopped at the time of the transaction, not 24 hours later.