Signs of Card-Not-Present Fraud: Are Your Customers Safe?

Mail order and telephone order (MOTO) merchants are responsible for taking the extra due diligence in protecting their customers and their company from fraud and all associated losses from it. Since most identity thieves and scam artists bank on the fact that businesses lack ample protection for card-not-present transactions-such as over-the-phone, Internet or mail order-it is imperative that MOTO merchants understand the signs of potential card-not-present fraud and report them immediately.

Some common signs of card-not-present fraud include:

• First-time shopper status: Merchants should be wary anytime they see a first-time shopper. Identity thieves are constantly on the lookout for new victims and often use credit cards in card-not-present transactions once to go undetected.

• Multiple orders of the same item: Card-not-present fraud often happens when a thief purchases multiples of the same items-such as ten Blu-Ray players-at the same time. Big-ticket items, or those with high resale value, should be flagged and verified since these are maximum profit sources for credit card thieves.

• Inflated ordering: Stolen credit card numbers are discovered fast, so thieves want to use up as much of the card as they can before it is deactivated or reported. Charging larger than normal purchases is often an indicator of a stolen card since thieves like to maximize their spending as quickly as possible.

• Multiple cards, one address: Merchants are responsible for verifying shipping addresses with the ordering party. Card-not-present fraud can be spotted by verifying the shipping address in comparison to the credit card account, name, and billing address. When multiple cards are used-not from the same account holder-and the shipping addresses are the same, the merchant must report the activity immediately and halt the order.

Merchants should be on the lookout for international addresses as well-especially if the cardholder’s billing address is in the United States.

• Rush orders: Orders with rushed or overnight shipping may be an indicator of card-not-present fraud. Although a valid card may be used by the intended party, merchants should take extra steps to verify the cardholder’s identity before allowing rush/overnight orders, especially for first-time purchases.

Tips for Preventing Card-Not-Present Fraud

There are steps MOTO merchants can take to prevent or reduce the number of fraudulent charges that go through their company. These can include:

• AVS or address verification service: Merchants with card-not-present transactions can compare the user’s billing address with the one on-file with the issuer. For example, when a user is prompted to enter their billing zip code online or if it is requested over the phone, AVS helps verify their address.

• CVV2 or card verification value 2: On the signature pad of a card there is a three-digit code that is used to verify that the cardholder is in possession of the issuer-sent credit card. MOTO merchants should request this code to determine a card’s validity.

• Expiration date: Requesting the expiration date of the card verifies whether or not the individual has the card present.

• Additional information: Merchants can request additional information-such as the issuing bank-to verify all card-not-present transactions.

MOTO merchants are at high risk for fraudulent transactions. Chargebacks, legal costs, and other associated liabilities can be catastrophic for some merchants. Therefore, taking the steps to verify a cardholder’s identity and validity of their card is imperative to keep merchants protected and help reduce card-not-present fraud.

If you are a merchant that accepts card-not-present transactions, it’s important to setup a secure account with the most trusted credit card processing company in the industry to eliminate all instances of card-not-present fraud to protect your company.

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