How to help detect and prevent merchant account fraud

According to Forbes, 33% of small businesses have been severely impacted by fraudulent charges – including eCommerce credit card processing fraud – while stressing the importance of selecting secure payment processes.

Read on to learn how fraud protection tools can help reduce the amount of credit card processing fraud that may occur within your payment environment.

Fraud monitoring tools for your business

Although fraudulent transaction activity is on the rise, fraud monitoring tools can help you detect fraud faster, protect your business, and safeguard your reputation. Using fraud management tools helps prevent criminals from:

• Testing cards on your account
• Making transactions from blocked countries
• Entering amounts larger than products/services offered by your business

Depending on your payment provider’s fraud management options, choose the PCI-compliant data security filters that make the most sense for your business. Combine these fraud management tools to benefit from the ultimate in data protection — while simultaneously reducing your PCI scope.

1. Basic merchant fraud detection steps

With eCommerce, all transactions are considered card-not-present (CNP), since neither the physical card nor the cardholder are present. Because of this, CNP transactions pose a greater risk for fraud. In order to make a sale, however, you have to trust that the true cardholder is authorizing each transaction.

To help reduce your risk, you can still ask for information that potential criminals might not have:

Address Verification (AVS)

In addition to the 16-digit credit card number, you should also request a billing address for each transaction. More specifically, you should verify the following:

• Does the billing address match the contact information on-file with the card-issuing bank?
• Is the customer trying to use a different shipping address (if ordering physical items)?

Card Verification Value (CVV) / Card Identification Number (CID)

Most consumer credit cards come with a three-digit card verification value (CVV) or four-digit card identification number (CID) that helps you verify whether the actual cardholder is presenting the card for payment versus a criminal with a stolen credit card number. Don’t authorize any transactions unless the customer can provide the correct CVV or CID code.

2. Country-specific transactions

With more advanced payment processing solutions, you can use country-specific IP filters to block or accept certain transactions:

Geo IP Tracking

This option allows you to automatically reject transactions from whichever countries you choose. For example, you can eliminate all purchases made from France, Japan, or Nigeria.

Card Issuing Country

With card issuing country filters, you have even greater control. This feature allows you to only accept a payment if the card was issued in countries that you specifically select. For example, your merchant account only allows purchases made with Canadian or U.S. issued credit cards.

3. Advanced fraud detection features

There are times when criminals have the right address and CVV code, and using proxies, they can circumvent traditional IP-detection. This is when you need to rely on more advanced security features like the ones described below:

Negative Database Security

Similar to spam detection, negative database security allows you to match each transaction against a list of high-risk card numbers and contact information.

Quotas and Thresholds

Stop fraudsters from entering amounts that are larger or smaller than the products and services you sell. Set maximum dollar amounts for sales, credits, and refunds. You can also set minimum amounts to prevent your account from being used for unauthorized approvals on stolen credit cards.

Velocity Filters

Prevent criminals from testing card numbers against your merchant account. This filter can be configured to automatically decline transactions based on several parameters, including number of transactions, number of transactions from a specific IP address, and maximum dollar amount for credits/refunds, sales, and total sales amounts.

Paused Transactions

Using a variety of filters, you can automatically put a hold on suspicious transactions. This is particularly useful for big-ticket items — especially when dealing with conveniently round numbers. Don’t let these transactions go through until you’ve had a chance to contact the cardholder directly.

How can we help?

If you want to learn more about how Clover can help you accept payments, run your business and sell more, please contact your Clover Business Consultant. You can also follow us on Facebook and Instagram. 

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This information is intended solely for informational purposes and should not be interpreted as legal, financial, or tax advice. Readers are strongly advised to consult with their attorneys, financial advisors, or tax professionals to obtain guidance tailored to their specific circumstances.