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  • #978679
    Opulence
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    Hi All,

    One of the businesses I consult to that used to deal primarily in wholesale has experienced very rapid growth in their online sales.

    They conduct “cardholder not present” transactions and as such, accept liability for any fraudulent transactions that are made. I.e customer buys with stolen card, the client sends out the goods and then a claim is made from the cardholder that they did not make that purchase nor receive any goods.

    We’ll be changing over to a more modern online payment gateway with SecurePay that offer FraudGuard but from what I can tell, this is purely a rules based rejection method.

    My question is, have people found that this is sufficient? I googled for Chargeback Insurance but didn’t find much.

    Do people allocate much time to trying to detect fraudulent cards or do you find that it becomes more work to do so than the benefit from catching the odd fraudulent order?

    Average order size online is around the $100 mark and Sales online are at the $500k mark (rest of business around the $5M mark.

    Thanks,

    #1108785
    John C.
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    Opulence, post: 120847 wrote:
    Average order size online is around the $100 mark and Sales online are at the $500k mark (rest of business around the $5M mark.

    Thanks,

    What percentage of that $500k is currently being lost to fraud? If it’s only a very small amount, then it’s probably not worth worrying about. It’s important to set aside pride when looking at these sorts of things – most of us don’t want to be ripped off, but we sort of need to accept that it happens and evaluate whether the effort is worth it, or whether we could add more value by devoting that effort into other revenue raising activities.

    #1108786
    Opulence
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    Yeah that was my initial reaction too and you’re right, currently it is a very small issue.

    The problem is that with the site exploding in growth and becoming much more prominent in the marketplace, its more likely to attract fraudsters which is what we’ve been seeing over the past few months.

    #1108787
    Fat Zebra
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    Hi Opulence,

    Fraud is always an issue with any online business.

    I would recommend that you look at what percentage of transactions are fraudulent at the moment and what sort of fraud is it (stolen credit cards or money laundering). Also look into where the transactions are coming from – are they from overseas or locally?

    Several things that can help limit fraud are:

    – Limit number of transactions per customer over a set time
    – Set a transaction limit (if average transaction is $100, look to set a $500 per transaction limit – any transaction above $500 can be processed manually?)
    – Ensure CVN is being captured for transaction processing (this is mandatory now)

    Any fraud guard is only as good as the implementation. There are steps that can be taken within the Cart to help straight away.

    Hope this helps..

    #1108788
    SalenaKnight
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    there was a great article on this in mybusiness magazine.

    Basically, there is a lag time between when a card is reported stolen, and when a stop is put on it and the banks won’t even disclose how long this is.

    Payment gateways only pick up on cards reported stolen. If the card number has been skimmed for example, and is used before the card holder realises, then the merchant is still liable for charge backs.

    It concluded by saying that there really wasn’t any way to be sure (as a retailer). Note that payments via Paypal can still incur chargebacks.

    #1108789
    Fat Zebra
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    flower-child, post: 120904 wrote:
    there was a great article on this in mybusiness magazine.

    Basically, there is a lag time between when a card is reported stolen, and when a stop is put on it and the banks won’t even disclose how long this is.

    Payment gateways only pick up on cards reported stolen. If the card number has been skimmed for example, and is used before the card holder realises, then the merchant is still liable for charge backs.

    It concluded by saying that there really wasn’t any way to be sure (as a retailer). Note that payments via Paypal can still incur chargebacks.

    Hi Flowerichild,

    It is now a requirement for all online payments or CNP (Card not Present) transactions to include the 3 digit CVN number with the transaction. This isn’t included in the magnetic strip and is unique to that card. Skimmed cards are more of an issue for retailers which dont require the CVN.

    As for lag time, you will find most banks will instantly freeze a credit card once it’s reported stolen. The issue here is more for people who dont try capture the funds straight away.

    Chargebacks can be a whole different issue. Although they do happen with stolen cards, they seem to be quite common with customers who dont recognize the business name on their statement. This results in people thinking their card has been stolen (or defrauded) and processing a chargeback.

    Cheers,

    #1108790
    SalenaKnight
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    thanks for the update fat zebra

    We do phone transactions (MOTO) with our eftpos machine on a daily basis, and entering the CVV number is not an option. We do actually ask for it (to see if they CAN read it out), though we don’t actually record any details.

    #1108791
    Fat Zebra
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    flower-child, post: 120910 wrote:
    thanks for the update fat zebra

    We do phone transactions (MOTO) with our eftpos machine on a daily basis, and entering the CVV number is not an option. We do actually ask for it (to see if they CAN read it out), though we don’t actually record any details.

    A number of eftpos terminals I’ve dealt with lately ask for the CVN on manual transactions. Might be worth while checking with your bank to make sure you have an up to date terminal.

    If you are selling online, you could look at using a virtual terminal through your gateway provider to process MOTO payments. This will require the CVN.

    We have also been setting up Pay Now pages for our clients who are wanting to ensure they are capture the CVN to ensure they avoid this issue. Could be worth discussing with your Gateway (if you use one).

    #1108792
    LucasArthur
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    Great post,, we too are in a similar position and take regular phone payments for items and no CVN required… its on a 6 month old terminal, thanks to FAT ZEBRA i will look into updating this to minimise any chargebacks.

    In talking about fraud, have yet to have one declared though.. touching wood as we speak…

    Will follow post for updates..

    Cheers and thanks
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
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