How to Prevent Fraudulent Online Payment Processing

MicahJWaters | Jun 10, 2010 |

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As online shopping becomes more and more common, so does Internet fraud. As such, online merchants must find ways of accommodating their customers while preventing costly fraud. While state-of-the-art payment gateways and technology can enable merchants to securely process transactions while averting fraud, there are also simple techniques a merchant can utilize to help prevent fraudulent online payment processing.

Start Fraud Before it Starts
Before shipping merchandise to a customer, verify the cardholder's information by utilizing fraud prevention tools and resources provided by your payment processor. The Address Verification System (AVS) will automatically check the billing address provided by the customer with the address on file with the credit card company (if you don't have access to AVS, contact your payment processor to add this service). You can also contact the credit card company directly to verify the cardholder's billing address and name; if there is a discrepancy, resolve it with the customer before shipping the merchandise.

Online merchants can also utilize the security features of the credit card being used. For instance, make sure the three digit security code (or four in the case of American Express cards) provided by the customer matches the correct code on file with the credit card company.

When in doubt, call the telephone number provided by the customer to ensure it is a valid telephone number. If there is no voicemail or you don't get a response a few days after leaving a message, cancel the order. You can also request the customer to fax you a copy of their driver's license or other form of government issued personal identification. If the customer is reluctant or unwilling to do so, the order is likely a fraudulent one.

Choose Secure Online Payment Processing
Aside from keeping a vigilant eye on all orders, online merchants should also opt for online payment processing that offers secure processing of transactions and a wide range of fraud prevention and security tools. Find out whether or not the service utilizes encryption when customers' personal information (including credit card numbers) are transmitted and if they offer IP tracking, fraud alerts or screening of email and mailing addresses.