Merchant concern about online credit card fraud and chargebacks 
is rising at a significant rate. According to the 2001 Online 
Fraud Report, conducted by Mindwave Research, it revealed that, 
"41% of merchants say the issue of online credit card fraud is 
'very serious' to their business." As e-commerce continues to 
flourish the number of instances of credit card fraud and 
chargebacks will continue to mount higher. It should go without 
saying that the need to take certain measures to reduce and 
virtually eliminate chargebacks and fraud is certainly paramount.

Chargeback, the word that Internet merchants fear. A chargeback 
is what it's called when a transaction is reversed. In other 
words, rather than adding money to your account it is deducted. 
Chargebacks can occur for a wide variety of reasons, such as 
double-charging, credit card expiration, bank error and customer 
disputes. If you get too many chargebacks against you, there is a 
possibility that you will lose your merchant account. Once you've 
lost your merchant account you are placed on the Visa/MasterCard 
Terminated Merchant File (TMF/MATCH list) for several years which 
all Merchant Account Providers have access to, and if they find 
you on the list they won't reissue a merchant account to you. 
If you are one of those merchants who have lost their merchant 
account, there is still hope. Imax Business Solutions 
specializes in helping companies who've lost their merchant 
account because of excessive chargebacks.

Here are some ways you can greatly reduce the instances of 
chargebacks and fraud, even potentially eliminate the risk 
altogether:


#9 Collect CVC2 and CVV2 Verification Numbers

This tactic alone can not only reduce instances of chargebacks by 
26%, according to Visa, but also reduce any pass-through fees 
that may be charged when a credit card order is conducted. On the 
back of MasterCard, most Visa and Discover credit cards is a 3-
digit security code located right after your credit card number. 
Requiring customers to give the 3-digit code acts as an 
additional verification measure. American Express cards also have 
a similar security code that is located on the front of the card 
right above the cardholder's account number and is usually 4-
digits long. Most online payment processors support entering the 
security codes when processing credit card orders. Check with 
your payment gateway provider (i.e. Verisign, Authorize.Net, 
ECHO Inc., etc) for details.

#8 Use Address Verification System (AVS)

AVS checks to ensure the address entered on the order form 
matches the address to where the cardholder's billing statements 
are mailed to. People ordering products and/or services using a 
stolen card number will never use the real cardholder's billing 
address, so this is your chance to stop the order before it's too 
late. AVS only works with orders conducted in the US. Failure to 
use AVS when processing credit card transactions will always 
result in paying higher credit card processing fees.

#7 Scrutinize orders from developing foreign countries

A large percentage of fraudulent Internet purchases are made 
from Indonesia, Russia, and other eastern block or developing 
countries. Accept orders from such countries at your own risk 
until a worldwide AVS system is developed.

#6 Let customers know what name will appear on statements

Many merchants who use 3rd Party Processing companies have 
run into problems because the company name that appears on 
cardholder's monthly statements is usually the name of the 3rd 
party processing company and not the company name of the site the 
cardholder made their purchase from. This isn't always the case, 
but in many cases it is. If you use a 3rd party processor, and 
even if you don't, make sure the customer knows what name will 
appear on their credit card statement at the end of the month. 
This will help to reduce any confusion that might would otherwise 
occur.

#5 Handle suspicious orders accordingly

If an order seems suspicious the best way to handle the situation 
is to either call or e-mail the customer and attempt to verify 
that they placed the order. As a rule of thumb, if in doubt, 
check things out. It may be a good idea that if a customer makes 
an unusually large volume purchase from your site to follow-up 
with a verification call.

#4 Watch out for orders using free e-mail addresses

Be wary of accepting orders from people who used a free e-mail 
address when ordering (i.e. Hotmail, Yahoo, etc.). Tracking 
people who used a free e-mail address is almost impossible, it's 
much easier for them to get away then if they used their Internet 
Service Provider (ISP) or their own company web site e-mail 
address. To check whether an e-mail address is a freebie or not 
just take the part of the address after the "@" symbol, add "www" 
to the front of it and see what website it brings up (i.e. 
joe@yahoo.com = www.yahoo.com).

#3 Signatures on delivery

If your business delivers products use a carrier that requires 
a signature on delivery, and allows you to have a copy of the 
signature. Retain these for your records.

#2 Request fax copies of ID and credit card

You may want to request your customer to fax a copy of both sides 
of their credit card and driver's license. This tactic usually 
works best in a B-to-B (business to business) sales environment. 
While this is not a defense under Visa or MasterCard rules, it 
is yet another way to deter fraud.

#1 Posting a warning message

Taking the time to post a warning message on your order page to 
those who may attempt to make a fraudulent order will greatly 
deter the number of instances of fraud. Be sure to mention that 
IP (Internet Protocol) addresses are being logged. IP addresses 
can come in handy when locating people about fraudulent orders.

Taking measures to deter and eliminate fraud and chargebacks from 
occurring are a necessity in order to operate a successful online 
business. Each day companies dedicated to risk management are 
developing solutions to provide merchants, like yourself, with 
extra protection because of the financial burdens chargebacks 
and fraud can bestow if ignored.

For more information on how your business may benefit 
from reducing chargebacks and fraud. Click over to 
http://www.cmscreditcards.com
 

Scott Burke; President of iMAX Business Solutions in charge 
of sales, strategy, and execution and thus is responsible for 
managing all aspects of the company's marketing, communications, 
new accounts, and support. scott@cmscreditcards.com
http://www.cmscreditcards.com/