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9 Ways to Reduce Chargebacks and Fraud
Copyright (c) 2006-2012 Scott Burke
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 MAXX Business Solutions is committed to making the merchant experience a pleasure and one that will build long-lasting business relationships. MAXX works as a trusted partner in merchant account credit card processing and strives to provide merchants with the best support, the best rates, and the best service in the industry. http://www.cmscreditcards.com/payment-processing.html
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Top-Level Category: Business Online Articles || Related Categories: Internet Articles
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