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Guarding merchants against Credit card fraud. Credit card fraud, of late, is giving numerous merchants sleepless nights. Any order with fraudulent payments is sure enough a loss for the internet buesiness finance. There would be hardly any business today which accepts credit card payment and has not had to face any fraud payment issues. Sometimes the large number of transactions that some businesses see on a daily basis can not be monitored, so such companies are very prone to suffer from frauds and charge-backs. Most companies tend to ignore this important issue and slowly they realize that they are piled up with too many losses owing to this mal practice. Any internet buesiness finance accepting credit cards should not ignore, rather should devise and implement measures to control fraud and minimize the losses that accrue from credit card fraud. Who needs to be even more careful is the small merchant, especially those selling high priced items, as simply a few fraud transactions could completely wash out their business. Let us now analyze how does all this happen and how to combat this situation, or still better how to kill the devil in the womb itself. The term that one very often comes across in credit card fraud issues is charge-backs. A chargeback takes place when the card holder of the card used for the transaction starts a dispute against the purchase made on the card. The reasons for him filing a dispute could be that 1.He never received the order that he placed 2. He did not get the thing that he had ordered for, that is either the wrong item was shipped or the item description given to him was different from the actual product. 3. The card was used by someone else as the card holder had either lost the card and it went into wrong hands or it was stolen. There are even chances that for online use someone just stole the card information and not the actual card. 4. The card holder is a miscreant himself and just wants to take advantage of the chargeback facility, thus he may keep the product and still request for a chargeback on some grounds. When the card issuing bank receives the chargeback request from the card holder, it initiates a charge back process to get back funds from the merchant. Most card companies would normally notify the merchant about the dispute and give him an opportunity to clarify his stand, but there are some others which will straight away pull out the transaction amount from the merchants account without even informing the merchant. The merchant and his bank may at times never even know until the entire process is over and done with, as the chargeback is carried out by the buyers credit card issuing bank. Some banks have a clear policy that they cannot be compelled to inform anyone of the chargeback. When accepting a credit card order the first thing to do is to verify that the order is being placed by the actual card holder only. For online transactions Address Verification System comes very handy, but so far this is available in US and very few European countries. That makes the system ineffective in case of international orders. Though it is not 100 percent fool proof, but it still is the best option available. This system tries to match the current billing address for the credit card with the billing address for the order in question. In most cases if the two things match it is quite possible that either the card holder of a person authorized by him is placing an order. In case there is partial matching, it is left to the discretion of the merchant whether to accept the order on not. But one thing is clear internet buesiness finance if there is nothing that matches at all the processing of such orders could be risky. For such orders you could give them some time and then try to contact the customer to verify the order before processing the order. Quite a few businesses today have found this to really work well for them. Talking of international buyers its better to avoid and rather restrict certain countries, which are in highlights for credit card crimes, unless and until the merchant has a pre established successful relationship with the customer there. Though the next thing that we are mentioning here may not appeal to all, yet this can be one way to counteract fraud. The idea is to restrict sales to people with paid email addresses only; this can guarantee safe orders to a large extent. But are you ready to loose out on the sale from people with free email addresses, especially knowing that the number of free email users is relatively large. Some internet buesiness finance concerns have adopted it and have found it to be fruitful. But what we would recommend is that this may be a good idea for some specific kind of businesses with more exclusive items for sale and may not be suitable to all businesses, especially those selling low cost and more common items. The most saddening part of charge-backs is that not only does the merchant loose out on the product and the cost of the product, but he is made to pay a chargeback fees for every order of this kind. And the fee could be as high as 15 to 50 dollars for every chargeback that could amount to a big loss with a few transactions like that. The merchant should ideally check with the bank fro the chargeback fee before setting up an account just to know how much loss he can suffer on an average in a month. And too many charge-backs can make you loose your merchant account with the bank. The worst thing to happen further is that the merchant will get listed in the terminated merchant file, which is used for reference by all merchant account providers, and you will never be able to open a merchant account anywhere else for a minimum of five years. Visa and MasterCard have very high fines for excessive charge-backs. Other Articles |