How to Use Fraud Detection Tools
As an online business, you have to be prepared for the added expense of lost products, shipping charges, chargeback fees, and the loss of your merchant account. Online transactions involve sharing financial information, authentication information, passwords, and more. The misuse of this information can lead to a number of different frauds. One major threat to your business is credit card fraud.
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What is Credit Card Fraud?
Credit card fraud happens when someone’s card is lost or stolen, or someone else has gained access to their credit card number or PIN. This information is then used to make unauthorized transactions, or transactions not approved by the owner of the credit card.
To process any transactions, businesses have to pay interchange rates, assessment fees, markup fees, and face the risk of:
1. Lost Revenue
You will have to handle the cost of shipping, along with the possibility of losing merchandise when and online payment is made. If you verify transactions by contacting customers, you’ll also have to take into account the cost of your time and effort.
For every transaction that’s disputed or fraudulent, you will have to pay a fee to the bank.
3. Termination of Your Merchant Account
Tools for Detecting Credit Card Fraud
In order to avoid the consequences of credit card fraud to your business, you’ll need to consider tools that prevent bogus transactions from happening in the first place.
Capture Card Verification Value (CVV) Codes
The CVV code is a three- to four-digit code on the back of credit cards. When processing transactions with the card not present, the CVV codes should match. If it does not match, your payment gateway should decline the transaction. This tool won’t completely eliminate fraud, but it will minimize the risk of excessive chargebacks.
Flag Large Transactions
Those committing fraud will often try to make large transactions at once before the card gets shut down. Whether a transaction is large or small, it can really hurt your business, and you’ll incur the cost even though it’s not your fault. A payment gateway can also terminate your account if something like this happens.
Make sure to limit large transactions by specifying a dollar amount, which will help you avoid chargebacks.
Payer authentication is an authentication measure that will secure online transactions for your customers. It allows them to create a secure code that can be used during check to confirm their identity. If the code is entered incorrectly, the transaction will get blocked and reduce the chances of chargebacks.