There is no question the most formidable challenge to global credit card processing today is mitigating fraud, and recognizing the good guys from the bad. There is no silver bullet solution for such, and it is rampant beyond imagination. We often come across merchants who are bewildered at the enormity and frequency of the many faces of fraud. In the current climate, however, online merchants have no choice but to protect themselves, but at what cost?
That is arguably the most debated issue at the present. But fraud mitigation and prevention is not the strain that many merchants believe it to be.
Fraud mitigation not as overwhelming as merchants may think
There is a quote we frequently use in advising e-commerce business owners of identifying clues that could be fraudulent:
‘We’re not saying it’s fraud; only that it warrants further examining.’
We pass this along to our network of global credit card processing merchants whenever we discuss chargeback mitigation, fraud prevention measures and/or performing manual reviews of transactions: Merchants need not check every transaction, just those that exhibit the signs of a fraudulent order. In the current climate, they cannot afford not to.
What are the most common clues of e-commerce fraud?
Sometimes the clues are in the orders themselves:
1. An e-mail address can give away plenty
Since fraudulent e-mails are so easy to create, but how does one tell their authenticity?
- If the e-mail address looks computer generated ([email protected]), it is likely fake.
- Check the website associated with the e-mail address. If it doesn’t exist, or is for sale, it is likely foul play.
- If the e-mail was recently created, say within a week, it was likely created for fraudulent purposes (There are companies for hire that can track the age of an e-mail address).
2. Large, bulk and expensive orders
Bad guys who are looking to score want their goods and they want them quickly:
- Overnight or rushed shipping.
- Bulk ‘purchases’ of the same – expensive – item, like a wristwatch or piece of jewelry.
- No signature requested upon arrival of goods.
3. Signs of stolen credit card use
Red flags should rise when any orders match the following description:
- Different shipping and billing addresses.
- Orders with several credit cards shipped to the same address.
- More than one credit card used by the same IP address.
- Orders with the same billing address shipped to different addresses.
- Purchases with an expired credit card
4. Standalone and miscellaneous clues
Fraudsters are creative and their trade comes in all varieties. Other dubious practices include:
- Purchases made in odd hours of the day.
- Purchases made in countries and regions where fraud is rife (Eastern Europe, Asia, Africa).
- Purchases made with a gift card (prepaid and gift cards are very popular targets for fraudsters).
Machine learning, AI: Is it affordable?
Machine learning and artificial intelligence schemes to mitigate fraud is absolutely worth consideration for any global credit card processing merchant. The affordability of such may be a challenge. However, we look upon such defense tactics as recovered revenue.
In machine learning, each of the above red flags are considered in real-time and each online order is given, for all intents and purposes, a fraud probability score. When that score reaches a certain level during a transaction, it calls upon the merchant to further examine it, then make a determination as to whether it is safe or too risky to process. Additionally, details such as shipping addresses, billing addresses, credit card numbers and IP addresses are maintained, so that when they may appear again for another purchase, the merchant is alerted.
Still, we fully understand that not every merchant can afford machine learning and AI. Thus we strongly urge them to create a criteria listing the above traits and red flags to create their own ‘fraud score’ of sorts.
In global credit card processing, we’re all affected by fraud
Unfortunately, processing credit card transactions online and mitigating fraud, nowadays, go hand-in-hand. We find too many merchants are ill-prepared or ill-advised of the level of risk in the current climate. The higher the occurrence of fraud means the likelihood of chargebacks, which can lead to a terminated merchant account.
Instabill is partnered with several chargeback and fraud mitigation firms that not only defend e-commerce merchants from online criminals but maintain low frequency of false positives.
We’re always up for a conversation about global credit card processing and the solutions we can offer. We’re available at 1-800-530-2444, Monday through Friday from 8 a.m. until 6 p.m., U.S. eastern time.