Fraud Prevention for Merchants

Excerpts from an article by Merchant 911's Director

Card number generators, hacked e-commerce sites, dumpster divers, hand held mag stripe readers, dishonest store clerks and waitstaff. They are all out to take money, goods and services from YOU - the on-line merchant. And let's not forget the card companies themselves who make money on charge back fees when the sale goes bad. There is a real incentive for them to NOT be careful with your money!

With all the ways there are for merchants to be scammed by credit card fraud, you might think there's nothing to be done but throw yourself at the mercy of the card companies and transaction processors. Fortunately there are steps you can take to greatly minimize the chances of being severely burned.

The time you can spend taking your own steps to avoid fraud depends, to some extent, on the number of transactions you do. Only you can decide what steps are economical, but if you process only a few transactions a day, you can spend an extra 5 minutes per transaction to be fairly certain that you have a good card. The question is not whether you can afford to take these steps, it's whether you can afford NOT to. Do NOT, as many small on-line business owners do, get caught up in the trap of wanting to make that sale in the worst way. Charge backs and resulting fees fees can put you out of business!

Your efforts depends on how much information you get from your processor. I've heard of processors that don't give their merchants the originating IP of the transaction, and in some cases they get only part (if any) of the card number. Find another processor! Others, such as Authorize Net, and Intellipay offer an option to "Auto-authorize and capture funds." Turn this option OFF or you lose all control over your money!

First and foremost, follow the procedures recommended by your payment processor and the card companies themselves. Failure to do so can get your merchant account pulled. If you've never done so, make yourself familiar with the contents of the Visa® Merchant Resource Center and MasterCard® Merchant.

A quick look at all the details of a transaction should give you a good initial screening for red flags. Consider ANY of the following a red flag worthy of further investigation: Free/anonymous E-mail; different ShipTo and BillTo addresses; foreign orders or shipments; all lower case information; larger than normal orders; rush orders; high ticket orders; and multiples of the same item.

Even if everything in the initial screening looks good, merchants need to remember that an authorization number received by the credit card means only that there is an account with that number and, at that moment, the funds are available. It does NOT mean that the transaction is valid. Therefore, you need to take additional steps.

These steps, the tools to complete them and much more are available in the Merchant 911 member area. Even if you only screen one transaction in 50, you need these tools!

Knowledge is your best defense. You aren't alone in this fight against fraud and there is strength in numbers. JOIN US!