Harnessing The Power To Stop Fraud
January 18th, 2010 | 
Author: Harnessing The Power To Stop Fraud
Online gaming companies are increasingly accepting payments from emerging markets in South America the AsiaPacific region and Eastern Europe as they continue to grow their business under the weight of gaming regulations. CyberSource’s ninth annual Online Fraud Report estimates that Internet merchants in the US and Canada alone will lose about 3.6 billion in revenue in 2007 due to online fraud an increase of about 16 from 3.1 billion in 2006. Although in line with sales growth with the dollarloss fraud rate holding steady at 1.4 in 2006 and 2007 according to CyberSource the bottom line is a higher cost of overall fraud due to growth in online sales.
Consider then the cost of fraud in emerging markets where some of the highest incidence of online fraud occurs and more typically as a result of counterfeit skimmed and phished card numbers not habitual chargeback offenders. So what is the solution? Authenticating or identifying the customer upfront in advance of a payment transaction to reduce the exposure to outright card fraud is probably the best bet. We must keep in mind that fraud detection systems and tools are used to identify the probability of risk associated with an online transaction “they do not guarantee that a fraud will not occur and certainly will never prevent a chargeback from being initiated by the consumer” said Andrea Wilson CEO of First Atlantic Commerce FAC.
But while consumer behaviour cannot be prevented by fraud detection tools the right mix of fraud management technology can reduce the exposure to fraudulent transactions.
Address Verification and Card VerificaTiOn CVV2 Numbers
Address verification AVS is still widely used for USA billing address confirmations and continues to be a hugely popular initial online screening service. CVV2 or Card Verification Value has picked up momentum with many Issuers declining authorisations if the CVV2 code doesn’t exactly match. AVSonly as a standalone service is available with or without a payment authorization and FAC supports 0 auth requests for AVS zip matching. Consider combining 1 preauthorisation requests with CVV2 and AVS data in a prescreening request to provide some very basic information about the cardholder including whether the card is valid if 1 declines there IS a problem with the card; whether the plastic is in the cardholder’s possession at the time of the transaction CVV2 is only located on the signature panel so the logic is that the customer should have the plastic in their possession if CVV2 data matches and whether the consumer’s billing address matches what the issuer has on file.
Geolocation
Geolocation is also an excellent addition to all merchants’ fraud and risk evaluation solutions. Used to identify the geographic origin of a transaction based on the IP address of the customer’s ISP it can assist merchants in ascertaining the actual geographic location of their customers and thus likelihood of suspect fraud. It can also be crosschecked with the Address Verification data that’s returned from 0 AVS screening as part of the same transaction request. For instance if a merchant identifies a consumer IP address as originating in Turkey yet the credit card billing address data matches a zip address in California this transaction is definitely suspect and should be flagged for further investigation.
IP geolocation is a very important tool for gaming merchants as MasterCard International now requires merchants to identify and store the physical location of their consumers as part of April 2007 operational compliance changes. Additionally licensing agencies and regulatory organizations who enforce territory compliance can use IP geolocation to ensure merchants are not violating compliance with the Unlawful Internet Gambling Enforcement Act of 2006 UIGEA if this so applies to their specific license regulations.
“Typically most online geolocation software providers are unable to bundle traditional payment authentication services with IP geolocation data requests in order to provide this level of cross referencing. This is what makes FAC’s solutions unique in the market. We’ve added innovation with flexibility and have created a suite of solutions that improve transactional risk profiling” noted Wilson.
3D secure for Verified By Visa and Mastercard Securecode
3D Secure is currently the single most important fraudprevention service offered today by the Card Associations for online merchants. Available in the consumer’s local domestic currency and language of the bank Issuer it enables gaming companies to implement Verified by Visa and MasterCard SecureCode in all regions and more particularly emerging markets such as Asia South America and Eastern Europe.
With the 2007 MasterCard changes in chargeback liability shift rules for attempted’ SecureCode transactions both Visa and MasterCard now support chargeback liability shift in Asia/Pacific LACR CEMEA and Europe for qualifying attempted’ 3D Secure transactions for RC 23 and 83. What’s important to understand is that liability shift is based on the merchant’s attempt to verify the consumer or the Issuing Bank not on whether the cardholder is actually enrolled in Verified By Visa or MasterCard SecureCode. If the consumer is enrolled and the password is correct this becomes a fully authenticated transaction and chargeback liability shift is guaranteed. If the consumer or the Issuer is NOT enrolled and the transaction is authorised the merchant also has a chargeback liability shift representment right if the cardholder disputes it based on RC 23 or 83.
FAC is certified to support local currency 3D Secure in LACR Europe and CEMEA regions. This allows merchants to know in advance of full payment authorisation whether they will have a chargeback representment right based on the 3D Secure response code and when the full payment transaction is subsequently processed through a 3D Secure acquirer. 3D Secure as a standalone service is available through FAC or it can be combined with CVV2 validation and IP geolocation services as a bundled consumer preauthentication suite.
Leading The Game
FAC can customize your preauthentication solutions after reviewing business and operational objectives. We realize no two businesses are ever the same and a shrinkwrap solution simply does not fit all business models. Flexibility is paramount and FAC can transform your transactional risk challenges into business opportunities by providing you with the tools you need to cut fraudulent activity reduce chargebacks and increase your profits.
About the writer:nbsp;nbsp;Read more about
Online Payment Gateways.
Related posts:
Posted in e-commerce