With retail sales moving online in record numbers, the physical checkout is no longer the premier destination for payments fraud. Payments processed online, over the phone or through the mail, known as card-not-present (CNP) transactions, are occupying a growing share of the total fraud reported in Canada each year. In 2016, Visa Canada estimated that nearly 80 per cent of all fraud occurrences took place in a card-not-present environment.
Cases of card-not-present fraud can involve stolen credit card or personal banking information. When the legitimate cardholder notices the fraudulent activity on their account, they will contact their card issuer to dispute the transaction, which may result in a chargeback.
Chargeback fraud, alternatively, is perpetrated by the cardholders themselves. Cardholders will make purchases online with the sole intention of claiming fraud afterward. If the merchant is unable to prove that the cardholder authorized the transaction, the cardholder is refunded the full purchase amount and retains the bought goods, while the merchant suffers a loss.
Use of stolen credit card information and chargeback fraud are just two of a number of schemes that fraudsters use online. Fortunately for retailers, there are many recommended tactics to help detect cases of online fraud before they result in lost sales.
Detect address mismatches
Address Verification Service (AVS) is a tool that can be used to help reduce credit card fraud. The address the customer provides during checkout is cross-referenced with the address the customer’s card issuer has on file. If the address details match, there’s less risk that the card data has been stolen. AVS only applies to payments using VISA®, MasterCard®, American Express®, and Discover® cards. Contact Moneris for more information on enabling AVS for your online store.
Know your customer
Understanding the habits and shopping patterns of customers can help to identify irregular activity on their accounts. Examples of ‘unusual’ purchase behaviour include:
- Unusually large orders –i.e. the average order size is $40 but you receive an order for $900
- Orders that include several of the same item
- Large ticket items that can be sold for cash profit - like TVs, electronics, etc.
- Multiple transactions on one card over a short period of time
- Multiple transactions on a card with a single billing address, but multiple shipping addresses
Use of Card Verification Values (CVV)
Requiring use of the CVV – a 3-4 digit code on the back of credit cards that verifies the purchaser is in possession of the card – acts as another tool to help prevent fraud. It can be more difficult for fraudsters to steal both credit card numbers and their corresponding CVVs, so requiring use of CVVs can help to reduce the number of fraudulent purchases and deter fraudsters from using your site.
Operating an online store can benefit your bottom line, but not without its own set of risks and challenges. Taking the time to create an online fraud prevention strategy can help render your website an undesirable target for fraud and ensure you’re making the most out of every online sale.
For more information, visit moneris.com/fraud.