My Merchant Account Blog

Basic Fraud Controls

Monday, September 19, 2011

One of the first things a merchant can do to prevent credit card fraud is confirm the identity of the cardholder. When the card is present, this can easily be done by requesting a photo i.d. with a signature on it, such as a driver’s license or a government-issued card.

In situations when the card is not present, such as an over-the-phone or online transaction, there are two basic steps merchants should take to make sure the customer is legitimate: running an address verification (AVS) and obtaining the card’s verification code.

Address verification is run through the payment gateway; it verifies the cardholder’s address through a series of steps. The cardholder’s billing address is sent to the payment processor for verification, who then passes the address information to the issuing bank. The bank matches the information with the address information they have on file for the card. Although this is a great system for preventing fraud, it is not perfect; it works only for United States addresses.

Card verification codes are the next line of defense for card-not-present transactions. Visa refers to this code as a card verification value (CVV), Mastercard calls it a card validation code (CVC) and American Express and Discover call it card id (CID). The code is a three- or four-digit security code printed on the back of credit cards, typically at the end of the signature section. The verification code program helps validate a genuine card is being used for the transaction and works similarly to address verification.

Posted by Administrator at 6:57:00 AM in Merchant Account Fees (23) | Comments (0)