My Merchant Account Blog

Reducing Fraudulent Transactions in ECommerce with the Quantum Gateway

Friday, January 08, 2010

As I was looking back at a few of the posts on here, I noticed that in January 2006 and January 2007, posts were made regarding fraudulent transactions (Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks and Fighting Fraud in your E-Commerce Store respectively were wrote). 

Since the holidays are over, now might be the time to consider taking another look at how your transactions are vetted / scrubbed when a consumer orders your product(s).  The Quantum Gateway is one of the very few electronic payment gateways that offers merchants many options to help prevent fraudulent transactions and chargebacks  (including the Quantum Vault - allowing the merchants to safely secure credit card numbers on the Quantum Gateway's secure servers) at no extra charge.  During the holidays, volume is usually higher on the Internet and fraud also increases.  Merchants are less reluctant to vet / scrub the transactions as they should because this might delay the order process.  People rely on this, especially this time of the year, to take advantage of the merchants.  Now is the perfect time to consider Changing Merchant Account Providers that might have a better electronic payment gateway, like the Quantum Gateway - which has more vetting procedures built into the electronic payment gateway at no extra charge.  This allows the merchant to have the transaction scrubbed before it is even processed, usually saving the merchant a transaction fee (First Data Might Be Overcharging Merchants (on Transaction Fees)).

However, chances are pretty good that you are already vetting the transaction some with Address Verification Service (AVS) and Card Verification Value / Card Verification Code / Card Identification Code (CVV/CVV2 / CVC/CVC2 / CID).  These are some very basic vetting procedures, but the merchant can do a lot more to help protect against chargebacks and fraudulent transactions.  Some of the other ways to vet a transaction:

• Calling Your Customer
• GeoIP
• Verified by Visa and MasterCard Secure Code
• More Options

These security features can be used during the checkout process with no extra time involved from the merchant.  The system will do everything for you - protecting you and saving you time.  The features are offered to you at no extra charge and you get the fraud prevention tools just like the Fortune 500 Companies.

Vetting the Transaction - More Options

While you have done quite a bit to ensure the electronic transaction is not fraudulent, you can still do even more.  If you are using MaxMind GeoIP - you should take advantage of the other features it offers.  You can purchase the MaxMind services from the company itself and build this into your checkout process or rely on the Quantum Gateway - decreasing development time and money and possible checkout errors.

The extra features that MaxMind offers include letting the merchant know:

• The transaction is originating from a high risk country
• The user is using a free e-mail address
• The user signs up with a username / password that has been detected as fraudulent in previous transactions
• The transaction is being conducted through a proxy server
• The shipping address is a known mail drop
• And many more options!

Besides no development code being added to the checkout process, the merchant can set the "score" through the Virtual Terminal.  Doing this, this prevents the transaction from being sent to the electronic payment gateway, saving the merchant a transaction fee, on top of a possible chargeback.

Vetting the Transaction - Verified by Visa and MasterCard Secure Code

Personally, we were never supportive of this feature from Visa and MasterCard, known as Verified by Visa (VBV) and MasterCard Secure Code (MSC) - Verified By Visa - MasterCard Secure Code: Things You Should Know.  One of the bigger reasons was because the merchant had to add to the checkout process and a lot of times, this feature would time out on the consumer during the checkout process, and the merchant might lose the sale.  Many merchants had complained about this feature even online and decided against it.

The Quantum Gateway though might have helped merchants by adding VBV / MSC into their gateway.  This requires no extra development, and the merchant can easily turn off this feature at any time in the Virtual Terminal.  This helps the checkout process with the merchant since everything is handled by the electronic payment gateway.

Maestro Branded Card

Another benefit of using MSC allows the merchant to accept Maestro branded cards.  Contact your merchant account provider for more details.

Vetting the Transaction - Card Verification Value or Card Identification Number

Card Verification Value (CVV / CVV2), Card Verification Code (CVC / CVC2) and Card Identification Number (CID) (Card Verification Value - Card Verification Code - Card Identification Number) is / was a way the card associations (Visa / MasterCard / American Express / Discover) came up to help verify the transaction.  It was supposed to "verify" the cardholder had the card in his / her hand during the checkout process.  The card associations told the merchants not to store this number anywhere on their systems, to help prevent hackers from obtaining this number.  Unfortunately within a few months, these numbers were available along with the credit card numbers and billing ZIP code. 

Chances are also pretty good that you, as a merchant, are already using and relying on this feature without even knowing it - just like Vetting the Transaction - Address Verification Service (AVS).

However, electronic payment gateways should still support this feature and should be used when vetting the transaction.  If the numbers do not match, a closer look should be made (Vetting the Transaction - More Options).  If this feature is not offered by the electronic payment gateway consider Changing Merchant Account Providers and / or electronic payment gateways.

The Quantum Gateway is one of the electronic payment gateways that supports and recommends that Internet and Telephone merchants use the CVV2 / CVC2 / CID (Card Verification Value - Card Verification Code - Card Identification Number to help prevent fraudulent transactions and chargebacks.

Vetting the Transaction - GeoIP

Thursday, January 07, 2010

One of the better known services is MaxMind.  They offer Geographical IP address location checking.  This service looks at the IP address of the transaction to see if it matches the billing ZIP code (or how far away it might be).  If the IP address does not match the country, the transaction might be fraudulent. 

Of course, there is always a reason the country might not match the billing ZIP code.  For example, a United States consumer is on vacation in Mexico for the winter.  He places an order on your website and the GeoIP comes back as mismatched.  Even if the product is less than $10.00, the merchant still needs to scrub the transaction even more.  The merchant is subject is a chargeback (Fraud Codes for Chargebacks) while also increasing his Chargeback Ratio.

The Quantum Gateway is one of the few electronic payment gateways offering the MaxMind GeoIP built into the system - helping to decrease development time.  It also does not charge for this feature, saving the merchant even more money while comparing these services to the "big boys".

Vetting the Transaction - Calling Your Customer

Wednesday, January 06, 2010

Calling your customer to verify the transaction is another way to help prevent fraudulent transactions: Reducing Fraudulent Transactions in ECommerce with the Quantum Gateway, Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks, Preventing Online Fraud, and Fighting Fraud in your E-Commerce Store.  However, this takes time and sometimes a lot more time than the product is worth, but you want to do everything you can to prevent a chargeback (Chargebacks Are Not Worth Fighting).  The customer might not be at home when you call or the product might be a gift for a member of the household and you might ruin the surprise if you speak with the wrong individual.  Plus, who is to say you will actually speak to the cardholder.

Phone Verification Products

There are some products available to merchants like Prove Out, Telesign, Onverify, Phone Confirm, and Telephone Verification from MaxMind.  These products can help verify the phone number and they will usually take into account the area code and the billing address to see how close these two numbers are.  For example, if the billing ZIP code is 90210 and the area code is 212, the merchant might want to look harder at this transaction to see why these two numbers are about 2,800 miles away.

Unfortunately, most of these products have to be added to the checkout process and this can cause problems at times.  The response from the product might lag, causing the customer to re-enter some or all of their checkout information again.  The merchant might lose the sale.

Fortunately, the Quantum Gateway took this into account when building its product.  They added Dial Verify right into the electronic payment gateway - allowing the gateway to handle the process.  This also reduces the amount of development the merchant needs to add as well.

All these extra security features can be considered to fraud and chargeback prevention tools that the Fortune 500 companies (the "big boys") are using at no extra costs to the merchant.

Vetting the Transaction - Address Verification Service

Tuesday, January 05, 2010

Address Verification Service, also known as AVS, is one of the primary tools used to help verify the identity of the cardholder.  The electronic payment gateway will usually do this vetting process itself - and some electronic payment gateway charge a fee for this service.  Some merchant account providers will downgrade the transaction to non-qualified if AVS is not done (or cannot be done).

There is really no reason not to do AVS on the transaction and most merchant account providers will not support the transaction if AVS can be done on the transaction.  If this feature is not offered by the electronic payment gateway, consider Changing Merchant Account Providers and / or electronic payment gateways (Quantum Gateway supports Address Verification Service (AVS).  The merchant account provider might be charging you more for each transaction if an AVS response is not posted on the transaction.

The Quantum Gateway

Tuesday, August 11, 2009

There are many different gateways being offered by merchant account providers today.  Most offer a few security features, starting from Address Verification Service (AVS) and CAV2 / CVC2 / CID / CVV2.  Unfortunately these are very archaic but still required by the providers and card associations as the first steps in preventing online fraud.

Probably one of the gateways that has been lacking in keeping up-to-date is the LinkPoint Gateway (also known as the First Data Global Gateway).  They renamed it sometime last year but unfortunately did nothing to upgrade its services.  A few years ago, they even rebuilt the gateway from scratch, but neglected to add any fraud prevention tools.

The Quantum Gateway is offered by CDGCommerce.  In addition to AVS and CAV2 / CVC2 / CID / CVV2 tools, it also incorporates other fraud prevention techniques at no extra charge to help the merchant reduce fraud and chargebacks.  This will save the merchant those extra fees usually imposed my merchant account providers/ gateways and fees from chargebacks, and the loss of money and time that it takes to fight those chargebacks.

Extra Fraud Prevention Tools at No Charge

Usually when the merchant decides to add extra fraud prevention, he has to purchase those tools and then pay a developer to integrate them in the checkout process.  However, these tools are built into the Quantum Gateway, making it easier than ever to add them to the checkout process.  All the merchant needs to do is to integrate the Quantum Gateway into their shopping cart and activate the extra fraud prevention tools into the virtual terminal - the Quantum Gateway will handle the rest.

One of the tools is from MaxMind, which includes Geographical IP address location checking, Proxy checking, (Free) E-Mail and Login Checks, Issuing BIN (Bank Identification Number Checks), Address and Phone Number Checks, and Fraud / Risk Scoring.  Even before the transaction hits the gateway, these checks are done - saving you that transaction charge.

Another vetting / scrub technique is DialVerify - this feature will actually call your customer, asking him to enter the code that appears on the screen, up to ten digits.  You can also upload your own recording.  This helps to verify the phone number, saving you time if you call your customers to verify the order.

And unlike most other providers, Verified by Visa / MasterCard Secure Code (VBV / MSC) is free. 

Other Value Added Services

Other fantastic services offered by the Quantum Gateway include batch processing, a virtual terminal, access to the virtual terminal via a handheld device (that can access the Internet), and a toll-free number to charge your customers if you do not have access to the Internet (10¢ per minute).

Recurring Billing

Recurring Billing is another free option offered by the Quantum Gateway.  This feature can be automatic - allowing the gateway to process credit card transactions at the interval you set.  If your fees change weekly or monthly, you can use the QuantumVault.  This will store the credit card securely in the Quantum Gateway, and you can charge the proper amount via batch processing, the virtual terminal, or through your web application at no charge. 

If you have varying amounts, you might be charging the credit card monthly, but storing the credit card in your web application / database.  You know this is very dangerous and if you have a breach, that data might be compromised.  The Quantum Gateway takes this into consideration, helping the merchant collect his money while protecting the customer's credit card data.