This article suggests preventative methods and post-order procedures that merchants can perform to minimize credit card fraud.
When a brick and mortar merchant accepts a credit card, and the charge is authorized, and assuming the merchant conforms to regulation, the merchant will get paid, even if a stolen card is used.
Liability for fraud shifts from the card issuer to the merchant for 'Card Not Present' sale (mail order, telephone/fax order, and internet sales). The merchant is generally liable for credit card charge backs, even when the bank has authorized the transaction. After a merchant is stung by a fraud, the credit card processors often hike their rates, citing increased risk. The merchant also risks losing their accounts with the card companies if their fraud rate gets too high.
Everyone points fingers at everyone else (processors, banks, VISA/MasterCard, and the merchants). Law enforcement and government agencies tend to only investigate big cases. No one takes the blame for credit card fraud.
Forbes claims most credit card numbers are still stolen the old-fashioned way. Unethical retail store clerks and restaurant employees steal card numbers often using hand-held skimmer devices. A scam artist can go through the trash of any merchant (brick and mortar or e-commerce) or customer garbage, get valid credit card numbers, and use them on the Internet.
Industry analysts and e-merchants claim the credit-card companies have yet to come to grips with the full scope of the problem. None of the credit-card associations disclose exact loss-rate figures for fraud - Visa, MasterCard and American Express claim to have a handle on the problem overall.
Credit card fraud is something that can never be completely eliminated, but rather something that must be managed. Merchants must develop a delicate balance between using safeguards to prevent fraud and not creating too many hoops for customers to jump through. This article concentrates on preventative methods and procedures that merchants can perform to limit credit card fraud.
After a credit card processor or registration service approves an order, the merchant needs to perform additional checks, as fraudulent orders sometimes are approved. The merchant should not depend on the credit card company, or the registration service, to stop all fraudulent orders.
Using a combination of the following methods and techniques can be the best defense against credit card fraud. Do not rely too much an any one technique or tool to prevent and detect credit card fraud.
FOLLOW THE MERCHANT RULES:
Follow the procedures recommended by your payment processor and the credit card companies. You can loose your merchant account for failing to follow their rules.
If a merchant suspects a fraudulent order, contact the registration service, so they can cut reduce the total number of charge backs. Registration services with a large number of charge backs will likely be charged higher services fees, which will be passed on to merchants. Everyone wins when the registration service, the card issuing bank, and the card holder are notified of a fraudulent or suspected fraudulent order.
