Merchant Card Services & Fraud Prevention

With merchant expansion comes credit card fraud expansion, this is a sad truth.  Many e-commerce merchants sell to international clients, this alone increases the fraud probability ten-fold.  However, there are things you can do to protect yourself.

1. Beware of high risk countries. Some are famous for originating fraudulent credit card transactions.   Below are the top 5

Top 5 countries that cause Credit card purchase fraud
Top 5 countries that cause Credit card purchase fraud

Scrutinize every purchase transaction from the above countries, decline these purchases for any smallest thing that looks wrong.

2. Check the IP address.  This one is simple: if the IP address doesn’t match the Credit Card billing address, manually review this order.  If these don’t match, and IP address is from the High Risk country – Automatic Denial.  The risk is so great with these countries, that some merchants block IP address associated with them.IP address from the High Risk country3. Think about your product. Simple economics, if your product has negligible hard costs (digital goods) you will only loose a portion of your profit due to fraud.  However if you have a tangible product with fixed costs (manufacturing, storing, shipping) when fraud occurs – you lost your costs which quickly adds up.  There are numerous examples of companies going out of business due to large credit card fraud. Make sure to implement stricter fraud rules depending on your product.

Merchant Card Services & credit card Fraud Prevention

4. Fraud versus Chargebacks. Believe it or not Chargebacks can cause more damage to your merchant account in the long run than fraud alone.  If you shipped 10 items to a fraudulent address and you never got paid, that’s a big loss.  But if you keep getting hit with Chargebacks and they are growing to more than 1% of your sales, your merchant account will be terminated, plus you could end up on MATCH list.  This means that you will not be able to get a merchant card services account for 5 years.  Always be paranoid about your Chargebacks!

5. Red Flags of Fraud. Here’s a list of things you should always watch out for:

  • A customer placing multiple orders in a short time span and shipping to different addresses.
  • The order was placed late at night, especially between 2:00 and 4:00 am
  • Name and address contains spelling errors
  • The email address is a nondescript jumble of letters and numbers
  • The customer orders multiples of the same item
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