11 Ways to Reduce Fraud (Source Chase Paymentech)
- Train operators to pay particular attention to anything suspicious in the way the caller speaks or responds to questions. One simple tip-off is a long pause or a hesitant answer. Make it a policy to request the name of the credit card issuing bank for any sale over a pre-set amount. If the caller doesn't know the bank's name, chances are he or she is using a stolen credit card number.
- Always ask for the cardholder's billing address. Ask for the cardholder's day and evening telephone numbers "in case there's a question." Orders with a "ship to" address that is different from the cardholder's billing address can be a danger sign. If you are suspicious, attempt to contact the cardholder on a second phone in order to verify the order. Also check if your system lets you compare the "ship to" and "bill to" addresses with the catalog's "mail to" address.
- Develop and maintain a "negative file" of fraudulent names, addresses, zip codes, cardholder numbers, and companies that you come across. Compile a zip code listing that spotlights areas in which you've experienced high fraud. An ongoing good rule of thumb is to decline "ship to" to prisons.
- If the address is a P.O. Box in a large city, further checking is suggested, especially if the order is from a new customer. Mail delivery services require a street address and will not ship to P.O. boxes.
- Carefully examine a "rush" order request from a new customer. Be especially alert when the caller appears ready to order whatever merchandise is in stock, regardless of size or style.
- Carefully examine any order with an unusually high dollar amount or which involves an out-of-the-ordinary situation.
- For American Express¨ and Optima¨ customers, ask for the 4-digit, non-embossed CID number printed on the front of the card (on the right border of all American Express Cards; on the left border of Optima Cards).
- For Discover Card¨ customers, ask the name of the bank on the back of the card. It should always be Greenwood Trust Company. If the customer can't identify the bank, chances are the customer is attempting a fraudulent purchase.
- For Visa¨ cards, ask for the non-embossed number which appears above the first 4 digits. It should match the first 4 digits of the credit card number. Ask the caller to describe the embossed symbol (CV on Visa Classic, BV on Visa Business, and PV on Visa Gold cards) to the right of the expiration date. Also, ask about the repetitive pattern of the Visa wordmark throughout the signature panel.
- For MasterCard¨, ask for a non-embossed 3-digit code on the back of the card following the card number. It should match the card validation code (CVC2). Also, ask for a description of the security character -- a stylized MC embossed on the line next to the valid dates on the face of the card.
- You may be able to use Automated Number Identification (ANI). Verify that the telephone number returned to you is the same as the one provided by the caller.
Additional Weapons: Address Verification Service and Card Security Codes
Address Verification Service – AVS immediately and automatically compares the billing address given to you by a customer against the billing address on file with the credit card issuing bank. Visa¨, MasterCard¨, American Express¨, and Discover¨ all offer AVS with virtually identical features.
Approximately 65% of all unauthorized card use is by people who do not know the billing address of the person whose account number they are using. AVS is only a tool. You will need to coordinate its usage with the red flags that we identified in the fraud tips. The instance of fraud is much greater when there is no AVS match and when the order is for a high dollar amount, the caller requests overnight delivery to an address that is located in a high fraud area, or the "mail to" address differs from the "billing address." AVS is most effective when you use it together with other fraud detection practices. You should analyze your actual fraud to determine the most common combination of suspicious conditions.
Card Security Codes - CVC2, CVV2 and CID
Fighting Internal Theft
Employee theft is a fact of life. One "game" that is unique to direct marketers is the misdirection of refunds to a thief's credit card. Monitor mismatches between the credit cards that are used for ordering and any subsequent refunds. Also, watch for employees who may purchase goods and charge them to customers' credit cards. Last but not least, take some extra steps to protect yourself:
- Monitor your employees
- Safeguard credit card numbers
- Balance your funds on a daily basis
- Stay Vigilant
You can significantly reduce credit card fraud by taking direct steps to counter criminals' weak points. Often, just your increased vigilance and scrutiny sends a message to thieves that your company is determined to protect itself against their illegal activities. That can be enough to persuade them to try their scams elsewhere. Chase Paymentech regularly sponsors Regional Chargeback and Fraud Awareness Seminars to assist merchants in gaining a better understanding of fraud issues. Contact your Account Manager for information on a seminar in your region.
Understanding Processing
For over 30 years, Visa and MasterCard and their various predecessors have been America's premier point-of-sale means of non-cash payment. During that time, thousands of businesses have reduced their costs, increased profits, and improved their level of customer service by accepting credit cards. Accepting credit cards is one of the most effective actions a merchant can take to make their business more competitive and improve their bottom line. Visa and MasterCard's credit card volume surpasses $1 trillion per year. credit cards are now carried in the U.S. by people where ever they go. People use credit cards when they are going the mall, on vacation, to the post office, on the Internet, out to eat, to the dentist, to pay college tuition, and to pay municipal fees and traffic tickets. These consumers enjoy the convenience, the flexibility, and the security credit cards offer.
Prior to the advent of electronic systems, most businesses used manual, paper-based systems to process credit card transactions or they did not accept credit cards at all. As the use of credit cards has expanded, electronic processing has proven more convenient for merchants and their customers by accelerating customer purchases, lowering processing expenses, and reducing losses from fraudulent cards. For years, card acceptance has been accepted at places like retail stores, hotels, restaurants, and airlines. But today, consumers expect to be able to use their cards for a much broader range of products and services, including health care services, groceries, tuition payments, movie tickets, and recurring payments such as cable or utility bills. This list will only continue to grow. As an example, the wholesale industry (ie: business-to-business sales) has become an active acceptor of credit cards as a means to enhance cash flow and reduce their accounts receivable balances. Many card issuers, including Paymentech, are now offering business and procurement cards to companies that wish to remove the necessity for issuing checks and purchase orders.
As a result, businesses that accept cards are not only gaining more customers, they are gaining more loyal customers and customers who spend more. In addition, these merchants and service providers are gaining real bottom line benefits for their business. The acceptance of credit cards by a merchant offers a wide range of benefits, to the merchant and his customer, both in terms of reduced operating costs and increased profitability, including:
- Increased Sales - Consumers can take advantage of specials, stock-up on the products and services they need most, and in the case of health care services, obtain treatment when it's needed.
- Faster Payment - With credit card transactions, merchants receive payment within 24-72 hours, thereby improving their cash flow.
- Reduced Costs - merchants can save time on the management of billing, sending statements and tracking receivables, and reducing their overhead and related expenses.
Payment Cycle
The payment cycle includes authorizing bankcard transactions at the point of sale, capturing data related to transactions, settling transactions with the card associations on behalf of the merchant, and providing transaction reporting to the merchant.
In the course of processing an electronic transaction, various parties operate together and the authorization and capture process is usually completed within 8-15 seconds. The authorization process includes obtaining approval from the card issuing bank for the cardholder's purchase at the merchant location. Authorization procedures confirm that the cardholder has the available credit to cover the purchase and verify that the card has not been reported lost or stolen. In the event that the merchant is not able to connect with the electronic draft capture ("EDC") network, USDC provides access to a voice authorization and automated voice response unit that is available 24 hours a day, seven days a week.
While each transaction is being authorized, the transaction data, including dollar amount and card number, is captured in the EDC network and used in settling the transaction and preparing reports to the merchant.
Settlement involves managing a record of each merchant's transactions and transferring funds from the issuer of the card to the merchant for payment. USDC transmits transaction information to the card issuing bank through Visa and MasterCard and arranges for funds to be transferred to the merchant's bank account via Automated Clearing House or Fed wire transfer, which is ultimately credited to the merchant's account. The cardholder is then billed by the card issuing bank. Each step in the settlement process involves a number of procedures that must be completed in accordance with Visa and MasterCard requirements. From the time of closing a batch of transactions, the merchant's account will generally be credited within 48 to 72 hours.
USDC uses a number of third-party national networks for its authorization, capture, and merchant accounting services. USDC has entered into agreements with several third-party vendors, which provide processing services to USDC. These third-party networks include First Data Corporation (NYSE: FDC), Paymentech Network Services (formerly Gensar), Telemoney Services, Mapp (Global), Visanet (Vital), among others.