The more online transactions you process, the more risk you have in being exposed to fraud. Selling items online is convenient for your customers and increases sales for your business, but there is a risk involved and it’s much higher than in face-to-face transactions. When neither the card nor the customer is physically present at the point of sale, the merchant experiences the greatest exposure to disputes, chargebacks and fraud. The following security measures can help reduce fraud exposure for online transactions.
- Authorize every sale on the order date
Authorizations are valid for a specific number of days which can range from 48 hours to 21 days depending on the merchant category code. Merchandise must be shipped and sales must be deposited within these timeframes or the authorization will expire. If your shipping date exceeds these time frames, obtain a new authorization code before shipping the merchandise.
- Ask for both a billing and shipping address
If the addresses are different, determine whether the difference seems reasonable. If the address is a P.O. Box, most delivery services will not deliver to these addresses. This may indicate lack of a permanent address.
- Ask for a phone number and email address
Not as a condition for accepting the sale, but as a customer service tool – the phone number and email address enables you to contact the customer for various reasons after the purchase (i.e. to inform him or her that merchandise is backordered, to verify order details, shipping confirmation, etc.)
- Ask for the credit card security code
If viewing a Visa or MasterCard, turn the card over and read the last three digits which trail the account number printed in the signature panel (this is the CVV2 or CVC2 code). For AMEX, look for a four digit code on the front of the card. Note: Merchants who request the CVV2, CVC2 or CID code will receive a match or no response when entering the transaction for processing.
- Use the Address Verification Service (AVS)
AVS enables you to compare the billing address provided by the customer with the billing address on file at his or her card-issuing bank. You receive a verification code indicating a match, no match or partial match. While this is not a guarantee against chargebacks, it allows you to make more informed decisions before shipping.
- Maintain a history of fraudulent customers
Store suspected customer names and addresses in a secure database to cross check when you suspect fraud.
- Email an order confirmation notice to the cardholder prior to shipping
This will not prevent chargebacks, but may reduce the number of inquiries and ticket requests.
These measures will help reduce exposure to fraud, but it’s also important to review transactions that seem out of the norm. The following observations can help prevent fraud: rush orders, above average transaction amounts, purchases that can be easily converted to cash, geographic location, 800 return phone numbers, multiple orders in a short period of time, unusual transaction sequences and fourth quarter sales as fraudulent activity seems widespread particularly around the holidays
If you suspect fraud, contact our office immediately.
