Fraud protection for online Credit Card Payments

In this article, we will cover everything you need to know about fraud protection for online credit card payments.


What is credit card fraud?

Credit fraud continues to be one of the most common types of online scams that plague businesses all over the world. There are two main types of credit card fraud: card-present fraud and card-not-present fraud.

Recently introduced EMV chip technology has made it harder for criminals to conduct a fraud for card-present transactions. In fact, ever since shoppers started using EMV chip cards, brick and mortar merchants have witnessed a 76% decrease in counterfeit payment fraud.

And while in-person card transactions are getting more secure, the target of credit card fraudsters is now the e-commerce world.

So what exactly is credit card fraud? In a way, credit card fraud is a form of identity theft. Online credit card fraud happens when a criminal steals your physical card, sensitive payment data, or PIN (personal identification number) in order to make an unauthorized transaction or to withdraw funds from your account without your consent.

What kinds of businesses can suffer from credit card fraud? All kinds!

Whether you're selling expensive equipment, socks, food, beauty products, or services - if you are selling them online, you are exposed to credit card fraud.

Apart from obvious consequences like financial losses and increased audit costs, fraud can also have a substantial impact on the image of the company. 

To avoid the unpleasant outcomes of transaction fraud, you, as a merchant, should seriously consider fraud detection and fraud prevention measures.


How to detect credit card fraud?

It's often hard to detect credit card fraud beforehand. There are, however, some hints that can help you recognize fraudulent credit card transactions. If only one or a couple of these signs are present during a transaction, you don’t need to worry too much. However, if a customer exhibits many of these suspicious behaviors, the transaction might potentially be fraudulent.

Here are some of the most popular indicators of a fraudulent order:

Large orders from new/unknown customers

Because stolen credit cards have a very short lifespan before they get blocked by owners or report stolen, criminals try to maximize the transaction. Hence ordering large quantities of the product may likely be a sign of a fraudulent order.

As a rule of thumb, you should be watching out for big orders from unknown customers. If your average check is $20, but you got a $1000 order from a new customer, this should raise a red flag.

Expedited international shipping

Keep an eye out for expedited shipments, especially when they are unreasonable. For instance, if you see a customer paying $200 to ship a $30 item internationally, the risk of a fraudulent transaction is quite high.

Shipping address is different from IP address

Most online payment gateways provide shoppers’ IP addresses. As an e-commerce merchant, you should be reviewing this information regularly. If the shipping or billing address is different from the IP address, this transaction has a higher risk of fraud.

Multiple transactions from the same card

Often criminals are trying to max out stolen credit cards before the account gets blocked. Thus watch out, when you see a few transactions from the same card over a short period of time (you can identify the card by the BIN + Last 4 + Due Date)

Multiple transactions from the same location

Fraudsters can use several cards and use different documents and e-mails to place orders to the same shipping address. Pay attention to multiple orders with the same zip code or even a huge concentration of orders to a specific city.

Multiple declined transactions

 If you received a report about multiple declined transactions that are followed by smaller purchases, this could very much be a red flag too.

While neither of these signs is a 100%  proof of a fraudulent transaction, watching out for these red flags can definitely help you detect bank frauds.


How to prevent Credit Card Fraud in Your Business

There are, some fraud prevention practices you can use to process orders securely.

Follow PCI Standards. We have discussed the best PCI practices to be followed by online merchants in this article, so make sure to check those out. Complying with these standards will help you prevent frauds of all kinds.

Choose payment gateways that offer basic security measures to prevent credit card fraud. When choosing a payment gateway for your e-commerce business, always go with one that provides maximum protection and fraud prevention.

Here are a few fraud protection measures payment gateways used to minimize fraud-related losses

Card Verification Value (CVV)
  • Card Verification Value, also known as CVV is also used by payment gateways as a part of multilayered fraud protection. The CVV is a 3 or 4 digit code that every credit card comes with. Since CVV codes are never stored in payment gateway databases, only the cardholders with physical cards in their hands can know and use this number. By enabling a CVV fraud filter, you can minimize the risk of card-not-present frauds.

Transaction Limits
  • Some payment gateways allow you to limit the number of large transactions from the same account per day. This step can prevent large transaction frauds from taking place and can help you avoid costly chargebacks.

3D Secure payer authentication
  • 3D secure authentication methods like Verified by Visa or MasterCard Secure code are other excellent ways to prevent fraud. This authentication method requires cardholders to enter a secure PIN code during the checkout, in order to confirm their identity.


Fraud Prevention Importance

When it comes to credit fraud protection for online credit card payments, your business can’t be throwing caution to the wind. Implementing defensive measures against credit card fraud will not only deter potential financial losses but will also help you protect your company's reputation.

Finding a payment partner that cares about security and has a robust and efficient fraud prevention strategy can help you increase your sales and stay away from fraudsters.


Discover EBANX Shield: Our global full fraud prevention strategy.