Category: CREDIT CARD FRAUD

Meeting Consumer Demand for Better Credit Card Fraud Protection
Consumers are demanding better protection for their personal data, and can you blame them?

With AI scraping every piece of data updated to the internet and credit card fraud always on the horizon, what can we do? Fret not, because there are ways to protect your customer data without breaking the bank.

Identity fraud cases have intensified by around 12% annually since 2020. As we navigate through 2025, the global cost of cybercrime will reach $10.5 trillion annually.

That’s not to mention online identity fraud now representing more than 70% of all identity fraud occurrences. Our rapidly evolving digital lifestyles are convenient, but challenging.

Consumers are increasingly aware of these risks, with 87% willing to pay more for products and services from companies that have a strong reputation for security.

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Which payment methods carry the lowest risk?

That’s the question on every business owner’s mind. The truth is, they’re all risk except for cash. But that doesn’t mean other, more accessible, payment methods have to be high-risk.

So, what exactly makes a payment method “low-risk”? Let’s dive in and explore some options that won’t keep you up at night.

Cash and Checks: Old School, But Still Cool

Remember the days when cash was king? While it might seem outdated, cash transactions remain one of the safest bets for in-person purchases.

No digital footprint means no data to steal. Checks, while not as trendy, offer a paper trail that can be easier to track than digital transactions. But let’s face it, carrying wads of cash or a checkbook isn’t exactly convenient today.

Debit Cards: Your Money, Your Rules

Debit cards offer a sweet spot between cash and credit. They use funds directly from your account, which means you’re not spending money you don’t have.

This inherently lowers the risk for merchants and can make you feel more in control of your spending. But don’t get too comfortable – card skimming is still a thing, so keep your eyes peeled.

Low-Risk Payment Gateways

For those who can’t resist the allure of online shopping (guilty as charged), lowing the risk of fraud at the payment gateways level is our new best friends.

Services that tokenize and encrypt customer data at checkout are leading the charge in secure online transactions.

While a gateway, itself can’t be high or low risk, how you use it can. Enabling certain features and requiring certain customer confirmation data will keep fraud at a minimum.

While these low-risk methods offer a good starting point, they’re just the tip of the iceberg in the world of payment security.

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The Growing Problem of Online Fraud

Online fraud remains a persistent and growing threat. As we navigate through 2025, the landscape of cybercrime continues to evolve, presenting new challenges for consumers and businesses alike.

The Rising Tide of Cybercrime

The financial impact of cybercrime is insane. By the end of this year, the global cost of cybercrime will to reach a mind-boggling $10.5 trillion annually.

This represents a 15% year-over-year increase, highlighting the rapid acceleration of online criminal activities.

Types of Online Fraud

The digital fraudster’s toolkit is diverse and ever-expanding. Some of the most common types of online fraud include:
1. Identity Theft: Cases have intensified by an estimated 12% annually since 2020, with no signs of slowing down.
2. Phishing Scams: These deceptive tactics account for a whopping 80% of reported cybercrimes in the technology sector.
3. Credit Card Fraud: Hackers continue to find new ways to steal credit card details, often using too-good-to-be-true offers as bait.
4. Online Shopping Fraud: Scammers sell non-existent or inferior products, or use fake transactions to harvest financial information.
5. Cryptocurrency Scams: The FBI reported that losses from cryptocurrency-related fraud exceeded $5.6 billion in 2023, a 45% increase from the previous year.
The Shift to Digital Channels

Online identity fraud now represents more than 70% of all identity fraud occurrences. AI-assisted tools act as a catalyst for fraud as well, leading to a 244% year-over-year increase in digital document forgeries.

The Human Cost

Beyond the financial implications, the frequency of these attacks is alarming. In the U.S., an average person experiences an identity theft attempt every 14 seconds. This constant threat erodes consumer trust and can have long-lasting psychological impacts on victims.

Clearly online fraud is something that will remain present, mature, and change along with ecommerce. Avoiding fraud altogether is unwise as you will never reach 0% fraudulent activity, whether that refers to chargebacks or your approval rating.

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Advanced Fraud Protection Technologies

As online fraud continues to escalate, both businesses and consumers are seeking advanced tools to safeguard their transactions.

The good news? Tech has risen to the challenge, offering innovative solutions that not only protect sensitive data but also enhance the overall user experience.

Let’s explore some of the most effective fraud protection technologies shaping the future of secure payments.

1. Tokenization: Protecting Sensitive Data

Tokenization replaces sensitive payment information, such as credit card numbers, with unique, non-sensitive tokens. These tokens are meaningless to hackers and cannot be reverse-engineered, making them an effective shield against data breaches.

For example, when a customer makes a payment, the token is used instead of their actual card details, ensuring that even if a breach occurs, no usable data is compromised.

Tokenization is widely adopted in mobile wallets like Apple Pay and Google Pay for its ability to secure transactions without disrupting the user experience. You can enable network tokenization through your payment processor and gateway.

2. Biometric Authentication: Who You Are Is Your Password

Biometric authentication leverages unique physical or behavioral traits—such as fingerprints, facial recognition, or voice patterns—to verify identity.

Unlike passwords or PINs, biometrics are nearly impossible to replicate, making them a highly secure option for fraud prevention.

For instance, many smartphones now use fingerprint or facial recognition for payment authorizations. Doing so adds an extra layer of security while keeping the process seamless for users.

3. Two-Factor Authentication (2FA): A Double Lock on Security

Two-factor authentication requires users to verify their identity through two separate methods—something they know (like a password) and something they have (like a one-time code sent via SMS or an authenticator app).

This dual-layer approach significantly reduces the risk of unauthorized access, as hackers would need to compromise both factors to succeed. Many online platforms and payment processors now mandate 2FA as a standard security measure.

4. Machine Learning and AI: Smarter Fraud Detection

Artificial intelligence (AI) and machine learning (ML) have revolutionized fraud detection by analyzing vast amounts of transactional data in real time.

These systems identify patterns and anomalies that might indicate fraudulent behavior, such as unusual spending locations or rapid fund transfers. For example:
- Anomaly Detection: ML algorithms flag deviations from normal transaction behavior.
- Risk Scoring: Transactions are assigned risk scores based on factors like location, frequency, and user history.
- Network Analysis: AI uncovers fraudulent networks by analyzing relationships between accounts or devices.
These technologies continuously learn and adapt to new fraud tactics, ensuring they stay ahead of evolving threats.

5. EMV 3-D Secure: Extra Protection for Online Payments

EMV 3-D Secure is an authentication protocol designed specifically for online transactions.

It adds an additional verification step during checkout—such as entering a one-time password or confirming via a banking app—to ensure that the cardholder is indeed the one making the purchase. This reduces card-not-present fraud while maintaining a smooth shopping experience.

6. Real-Time Monitoring Tools

Advanced fraud detection systems now offer real-time monitoring capabilities that instantly flag suspicious activities.

For example, AI-powered tools can detect unusual login attempts or high-value transactions in unfamiliar locations and immediately alert users or block the transaction until further verification is completed.

MITIGATE FRAUD AT CHECKOUT
April 2, 2025
Increase Conversions, Decrease Declines with Alternative Payment Modes like FedNow
Are you looking for an easy way to increase your conversions and decrease declines?

Incorporating alternative payment modes, such as FedNow, into your existing payments system can be a powerful tool in helping achieve these goals. With the rise of debit cards and the prevalence of mobile wallets, incorporating new ways to quickly process payments can mean increased customer satisfaction, higher conversion rates, and fewer declined transactions.

In this article, we’ll explore how alternative payment modes like the FedNow service (the Fed’s new instant payments system) can help you increase conversions while decreasing declines as well as strategies for getting started with implementing these platforms in order to maximize their potential impact on your bottom line.

Why are merchants are experiencing an increase in declines in 2023?

Merchants in 2023 are experiencing an increase in declines primarily due to insufficient funds and a tightening of the reigns for credit card issuers who are less lenient when it comes to lending money or allowing cardholders to overdraft.

Traditional payment modes, such as credit/debit cards, are no longer the only preferred option for consumers. The rise of mobile wallets and instant payment services has given customers more choices when it comes to making transactions. As a result, businesses need to adapt their payment systems to cater to this trend or risk losing out on potential sales.

Outdated payment systems can also contribute to declined transactions or, at the very least, hinder conversions. Older systems take more time to process payments, resulting in delays and a greater potential for errors. Both can frustrate customers and lead to an increase in chargebacks.

Fortunately, incorporating alternative payment modes like FedNow can help mitigate these issues by providing faster transaction speeds and increased security measures for all parties involved. With easy access through mobile phones or other devices, this innovative system streamlines the checkout process while reducing risks associated with traditional debit/credit card processing methods.

By embracing these new options alongside traditional ones, merchants can provide a seamless experience that meets evolving customer expectations – delivering improved conversions without sacrificing safety or convenience for anyone at any point during the transaction journey.

Experiencing an increase in declines? We can help!

What are the challenges of traditional payment systems?

Traditional payment systems have been around for decades but are still plagued by challenges.

One of the most significant problems is security. Hackers often find ways to compromise sensitive customer data, resulting in a loss of money and credibility for businesses that rely on traditional payment methods.

Another challenge faced by traditional payment systems is their inability to adapt to rising technological advances. Traditional payment systems cannot convert easily to a new way of processing payments; they are too established. Thus, they release new products and services alongside their traditional counterparts but rely on you, the merchant, to make the transition.

Here’s a list of the most common challenges merchants face with traditional payment systems:
1. Chargebacks: Chargebacks occur when a customer disputes a transaction and requests a refund. Chargebacks can be costly for merchants as they may have to pay chargeback fees and lose revenue from the sale.
2. Slow settlement times: Traditional payment methods often have slow settlement times, which can impact a merchant’s cash flow and cause delays in receiving payments.
3. High transaction fees: Merchants are often charged high transaction fees for accepting payments through traditional payment methods, which can cut into their profit margins.
4. Payment fraud: Merchants face the risk of payment fraud, which can occur when fraudsters use stolen credit card information to make purchases.
5. Declined transactions: Sometimes, legitimate transactions are declined by traditional payment methods due to various reasons such as insufficient funds, technical issues, etc. This can result in lost sales and frustrated customers.
6. Limited payment options: Merchants may not be able to accept certain types of payments with traditional payment methods, which can limit their customer base and reduce sales opportunities.
7. Lack of transparency: Traditional payment methods often lack transparency, making it difficult for merchants to track their payments and understand their processing fees.
8. Compliance issues: Merchants accepting payments through traditional methods may face compliance issues with regulations like PCI-DSS, which can be time-consuming and costly to resolve.
In contrast to this, alternative payment modes like FedNow work much faster with an instant processing system that eliminates human error and helps improve transaction efficiency while offering enhanced security measures. By using these modern options alongside existing methods, you can increase your conversions while significantly reducing declines – thus ensuring maximum profitability for your business.

What is the FedNow service?

FedNow is a new financial service launched by the Federal Reserve Bank in 2021 that enables instant funds transfer between banks and financial institutions across the United States. This real-time payments system allows for seamless transactions, which means customers can receive their money within just seconds of it being transferred, even outside regular business hours.

The main aim of FedNow SM Service is to increase efficiency and reduce transaction time for businesses, thereby enhancing customer satisfaction. This pilot program is a complement, not a replacement, to the Fed’s, U.S. Treasury’s, and central bank’s existing services like, FedLine and FedWire.

Senior Vice President and FedNow Program Exec, Ken Montgomery, states, “FedNow will allow all participating financial institutions, from the smallest to the largest and from all corners of the country, to offer a modern instant payment solution.”

By incorporating such alternative payment modes into existing systems, companies can improve their checkout process and create an overall better end-user experience. With FedNow’s fast transaction times and reduced chance of declined transactions compared to traditional methods like checks or wire transfers, it’s no surprise that this innovative payment mode is gaining recognition as an effective tool for increasing conversion rates and reducing declines.

As greater emphasis is placed on digital banking and online purchases over physical ones, services like FedNow will continue to revolutionize the way we process payments across the country.

Need an alternative payment solution right now? Tell us!

What are the benefits of using alternative payment systems like FedNow?

Using alternative payment systems like FedNow can offer numerous benefits to businesses of all sizes.

Faster Payments

Alternative payment modes often offer faster settlement times, which means merchants can receive their funds more quickly and improve their cash flow.

Lower Transaction Fees

Alternative payment modes can often offer lower transaction fees than traditional payment methods, which can help merchants save money and increase their profit margins.

Increased Security

Alternative payment modes often offer increased security measures to protect against fraud and other risks, which can give merchants and their customers peace of mind.

Improved Customer Experience

Alternative payment modes can offer a more streamlined and convenient checkout experience for customers, which can increase customer satisfaction and loyalty.

Expanded Payment Options

Alternative payment modes can often offer a wider range of payment options, including digital wallets, mobile payments, ACH (automated clearing house) and other emerging technologies, which can help merchants reach more customers and increase sales.

Enhanced Data Analytics

Alternative payment modes can often provide merchants with detailed data and analytics on their transactions, which can help them make more informed business decisions.

Compliance with Regulations

Alternative payment modes can often help merchants comply with regulations like PCI-DSS and other industry standards, which can reduce the risk of compliance issues and associated costs.

By using alternative payment modes like FedNow service, merchants can benefit from these advantages and improve their overall business operations and profitability.

How can alternative payment methods increase conversions and decrease declines?

Nowadays, consumers expect quick and seamless transactions, which is where the importance of new and innovative payment modes comes into play. By providing easy-to-use options for transactions such as instant bank transfers, electronic wallets, or contactless payments, small businesses can create a convenient shopping experience that makes them stand out from competitors.

Utilizing alternative payment infrastructures also allows for improved security measures to be implemented in your transaction process. This increased level of safety aids in fraud prevention which results in fewer declined transactions that could have caused negative experiences with shoppers.

Furthermore, integrating these solutions not only reduces any inconvenience associated with failed payments but increases user trust which induces repeat business over time. With all its advantageous features incorporated into existing checkout processes seamlessly; it’s clear to see why incorporating this service will help achieve improvements not limited to customer loyalty trust but overall profitability as well.

Conclusion

Innovative payment solutions allow customers to make fast and secure transactions without having to go through tedious and time-consuming processes. That’s one of the goals of using FedNow—but that’s not the only payment service provider offering a high level of security, convenience, and functionality. Many fintech companies out of Silicon Valley offer similar services you can implement right now instead of being an early adopter of FedNow (releasing in June).

By adopting these new methods, merchants can offer their customers flexibility in their payment options, ultimately leading to higher customer retention rates.

Reduce the risk of chargebacks, delayed payments, and fraud by implementing alternative payment processors today. DirectPayNet will help connect you with the provider that works best for your business type. Get in touch today to get started.

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March 24, 2023
Merchants: Win Your Chargeback Dispute, GUARANTEED
As a merchant, chargebacks can be one of the most frustrating and costly parts of doing business. But what if there was a way to guarantee you would win your chargeback dispute?

In this article, we will reveal the secrets of winning your chargeback dispute as a merchant, guaranteed. We’ll provide practical tips and advice to equip you with the knowledge and tools to successfully fight back against credit card chargebacks.

With the right strategies in place, you can ensure that you’ll win your chargeback dispute, every time. So if you’re ready to take control of your disputes and protect your hard-earned profits, then this article is a must-read.

This article follows a video guide we created on the same topic. If you’d like to watch and listen instead, head here.

First, what causes chargebacks?

Chargebacks occur when a cardholder disputes a transaction through their bank or credit card issuer rather than requesting a refund from you. Reasoning for doing so can include:
- mistakes in pricing or product description,
- faulty or defective products,
- or simply because the cardholder does not recognize the merchant or the purchase on their statement.
In order for a merchant to win a chargeback dispute, they must have compelling evidence that the customer knowingly and willingly purchased the product or service.

The chargeback process begins when the customer contacts their issuing bank and says they need a transaction refunded (which will correlate to a chargeback reason code). The issuing bank will then investigate the dispute and provide the merchant with a “chargeback notice” and an opportunity to respond to the customer’s claim.

To win the dispute, the merchant must provide evidence which clearly states that the customer knowingly and willingly made the transaction. This might include a copy of the customer’s signature, an authorization code, or a receipt showing the customer’s full name, address, and other details. If the customer’s claim is rejected, the merchant may also be required to submit a rebuttal letter pointing out any discrepancies in the customer’s claim.

By understanding the chargeback process, merchants can ensure that they have the necessary evidence to win their chargeback dispute every time. By taking the time to educate yourself on the process, you can protect your hard-earned profits and manage credit card disputes more effectively.

Find our 3-step guide to successfully winning a chargeback dispute below.

3 Steps to Win a Chargeback Dispute

1. Gather Evidence

Gathering the necessary documentation and evidence to win your chargeback dispute is an essential part of the process. To dispute a chargeback, merchants need to make sure they have all the evidence necessary to prove their case. This includes:
- order records
- proof of delivery
- customer correspondence
- screenshots of transactions
- AVS and CVV completion
- phone number, email, and customer info
The chargeback process can be complex and time-consuming, so it’s important to make sure you have all the relevant data ready and organized.

In addition, merchants should also collect any evidence that could be used to illustrate their customer’s purchase journey. This includes order confirmation emails, shipping notifications, and any other communication sent from the merchant to the customer. By providing this type of information, merchants can demonstrate that the customer had ample opportunity to inquire about their purchase before filing a chargeback.

This serves as compelling evidence that the merchant fulfilled their part of the transaction and acted in good faith.

Once the required documentation and evidence is gathered, merchants can then construct a rebuttal letter to submit to the payment processor or cardholder’s bank in response to the chargeback.

2. Writing a Winning Chargeback Representment Letter

The first step to winning a chargeback dispute is to ensure that you have all the necessary evidence at hand. Make sure you have a full and accurate record of the transaction, including credit card information, date and time of purchase, and the customer’s signature (if applicable).

If you have any additional evidence such as proof of delivery or tracking information, make sure you have copies of those too. It is also important to make sure that you know the chargeback reason code, as this will be instrumental in forming your response.

Once you have all the evidence, it’s time to write your chargeback representment letter. The letter should concisely explain why the chargeback is invalid and offer proof that the customer was satisfied with the transaction. You should also state the reason code associated with the dispute and provide compelling evidence to back up your rebuttal. This can include documentary evidence such as:
- invoices
- proof of delivery
- customer feedback
- transaction details
- login attempts
- emails and other communication
Make sure your letter is clear and to the point, as this will help to ensure that the issuing bank takes your dispute seriously. You don’t have to include every piece of information, only include the ones that make sense and support your stance.

Type everything up into a Word document, insert your screenshots and proof, and label everything. Don’t leave anything up for the reader to infer; spell it out.

3. ACT FAST to Win the Dispute

The best way to win a chargeback dispute as a merchant is to act quickly. The longer you wait to dispute a chargeback, the more difficult it becomes to overturn it. The chargeback process moves quickly, and the more time that passes, the more evidence can be lost.

Once you have completed the paperwork and evidence, it’s important to submit your claim as soon as possible. You should also follow up with the issuer in a timely manner to ensure that they have received your submission and to make sure your case is being reviewed.

By acting quickly and gathering compelling evidence, merchants can significantly increase their chances of winning a chargeback dispute. This will help to protect their business and save on expensive chargeback fees or even 3rd-party chargeback services that may not be giving you the greatest chance at winning.

Once you have a thorough understanding of the dispute process and have all the necessary evidence to support your dispute, you can fight chargebacks with confidence. Knowing how to dispute a chargeback and having the right strategies in place will not only save you time and money, but also guarantee you are set up to win your chargeback disputes.

Chargeback Prevention Is Best

Chargeback and fraud prevention is the best way to ensure that merchants can avoid customer disputes, fees, and payment processor lockouts. By engaging in preventative measures, merchants can limit their chargeback exposure and reduce the number of chargeback disputes that occur.

This involves implementing risk mitigation strategies, such as:
- verifying customer information prior to the sale
- providing a clear refund policy or return policy
- offering fraud monitoring services
- adhering to industry best practices
Additionally, merchants should always maintain a record of customer transactions and provide customers with clear terms and conditions. This will help ensure that customers understand their rights and obligations when making purchases and can provide compelling evidence if a dispute arises.

When a chargeback dispute arises, merchants should have the necessary evidence ready to present to the credit card companies and the customer. This evidence should include detailed product descriptions, customer signatures, shipping information, product images, and other important details. Merchants should also be prepared to answer any reason codes that the credit card company provides and provide a chargeback rebuttal letter to dispute any unfounded claims. By having all of this information gathered, merchants can be more confident in their chances of winning their chargeback dispute.

Each card network (Visa, Mastercard, American Express) has different rules and regulations for chargebacks. Your win rate might be higher on one network than another, just as your chargeback ratio might be higher on one. The bottom line is that you don’t want to spend your time and money disputing fraud chargebacks at all. If each network poses different rules, then you don’t want to risk increasing your chargeback rate when you can easily prevent them from happening in the first place.

Is your business suffering from an increase in chargebacks?

Let us take a look and see what’s going on in your payment ecosystem. We can help you identify the cause of chargebacks and offer solutions, like a dedicated high-risk merchant account, to permanently resolve some of your issues.

Get in touch with our team of payment experts today.
February 27, 2023
5 More Signs of Credit Card Fraud at Checkout
It’s no secret that credit card fraud is a growing problem across the entire globe. As technology advances, so do the methods and schemes used by fraudsters.

Unfortunately, it can be difficult to detect and stop credit card fraud at checkout. But don’t worry; in this article, we’ll cover five more telltale signs of fraudulent activity scammers use at checkout that you can look out for. We’ll explore the warning signs to watch for and offer some tips to minimize risk.

Armed with this information, you can protect your business and your customers from potential phishing scams and make sure the purchases going through your payment gateway are as secure as possible. You can read our first 5 signs of fraud here.

So, let’s dive in and uncover five more telltale signs of credit card fraud at checkout.

What is Credit Card Fraud?

Credit card fraud is a growing problem across the world, and technological advances have made it easier for fraudsters to exploit weaknesses in the checkout process.

Fraud can come in various forms, including identity theft, skimming, and phishing. Merchants need to be aware of the warning signs of fraud and take steps to protect their customers and their business from it.

At checkout, fraudulent activity can be difficult to detect, but there are telltale signs that merchants should look out for. These include:
- purchases made with a stolen credit card
- unusually large orders
- orders from multiple locations
- requests for an unusually large refund
- shipping and billing addresses that differ from one another
- maxing out the available credit on a brand new card or new account
Something you should know: all online purchases and sales come with a level of risk due to them always being CNP (card-not-present) transactions. This type of fraud and risk doesn’t happen in stores because the physical card is present and the cashier can verify the person’s identity on the spot.

To protect against fraud, merchants should always verify the cardholder information, ask for additional authentication if necessary, and obtain the customer’s signature at the time of purchase.

Additionally, training staff to recognize suspicious activity and double-checking customer information can help to further protect your business and your customers.

5 Signs of Credit Card Fraud During Checkout

1. Same Card, Different Shipping Address on Multiple Orders

One such sign of fraudulent activity at checkout is when a customer orders multiple items with different shipping addresses but the same credit card.

This could be an indication that the customer is trying to purchase items for someone else, but it could also mean they’re using a stolen card.

What to do about it:

AVS (address verification), CVV, and 2FA (2-factor authentication) like Visa’s 3D Secure—MasterCard has one too—will help verify the identity of the user.

It’s not definitive proof that because a shipping address doesn’t match the billing address equals fraud, but it is one step closer. We want to minimize risk as much as possible. When there seems to be a mismatch of information, you can set up your checkout flow to be friendly and informative. Let the customer know that the address seems off and they need just a bit more information to keep things secure.

Sure, it takes an extra few seconds but the safety of a customer is most important. Taking these additional steps can help reduce the risk of fraud and protect both businesses and customers.

2. Several Cards Used for a Single Order

One increasingly common form of credit card fraud is when a fraudster uses multiple cards to purchase a single item. This is done to cover high-value purchases and is also known as “card stacking.”

In this type of fraud, the fraudster may even use multiple cards from different issuers, often from different countries. They’ll use the same address but with different cardholder names, and make a single purchase. Sometimes mixing card types, as well, like debit cards, pre-paid cards, and credit cards from different lenders.

A similar form of multiple card fraud is when a single card is used to make multiple purchases, often with small increments. Hackers may use a stolen card and make purchases in small amounts in order to avoid detection. This can be especially hard to detect as the fraudulent purchases will likely be made from different merchants.

What to do about it:

To protect against multiple card fraud, merchants should look for suspicious behavior at the gateway level. For example, if a single order is being placed with multiple cards, have some checks in place to compare the billing information from those cards.

Many high-ticket orders are expensive and do require multiple cards to complete, so the fact of using multiple cards shouldn’t be shut down right away. Instead, spend a little extra time or money on automation services that make it more secure.

This would be a good opportunity to contact the customer directly and ask them to check their credit card statements and issue a credit freeze. Do this even if each card contains the same customer name and come from the same credit card company. You don’t want your business to be infamous for being a zero liability company.

Merchants should also be aware of customers making multiple small purchases with the same card. This should be flagged as potential fraud and the customer should be asked to provide additional verification of the card.

3. Shipped to Freight Forwarding Services

Freight forwarding services can be a great tool for businesses to ensure their goods are delivered promptly and safely. Unfortunately, they can also be used as a way for fraudsters to carry out credit card fraud.

In order to protect your business and customers from fraudulent activity, it is important to recognize the warning signs and take the necessary steps to minimize risk. This one coincides with foreign purchasers as freight forwarding services are used to ship internationally most of the time.

What to do about it:

This issue is a tough one to recognize and prevent. Monitoring IP addresses and matching them to billing locations is a good strategy. You could also have in your system a list of the most popular freight forwarding companies and their addresses to flag. That way, customers are asked more verification information before the payment goes through.

4. Email Address Doesn’t Match the Shopper’s Name

One of the most common signs of potential credit card fraud at checkout is when the email address provided does not match the shopper’s name. If the email address and the name are significantly different, it could be a sign of a stolen credit card or identity theft. It may also be a sign that the customer is misrepresenting themselves to hide their identity.

What to do about it:

Not everyone uses an email address with their name in it, and that’s okay. But many emails do contain either the first name, the last name, or the customer’s initials. Get fraud prevention software that can compare billing names with the provided email. If there is no matching content at all, then it could be a fraudster.

5. IP Address Doesn’t Match Shipping or Billing Address

One of the warning signs of potentially fraudulent activity at checkout is when the IP address associated with the transaction does not match the shipping or billing address. When customers are making online purchases, the IP address associated with their transaction is recorded.

IP addresses in fraud can be used in two ways:
1. Fraudsters may attempt to use a different IP address in order to commit credit card fraud, like using a VPN.
2. Fraudsters may be shopping with an IP address that doesn’t match the location of the billing address.
What to do about it:

The most effective way to check for irregularities is to compare the IP address associated with the transaction to the shipping and billing address. If the two do not match, it is a potential sign of fraud.

Another way to help determine a fraudulent transaction is to look for suspicious activity associated with the IP address. If the same IP address has been used to make multiple purchases with different cards, this can be an indication of fraud. By checking the IP address, it is possible to identify any suspicious activity that may have been associated with it.

Best Practices for Keeping Your Business and Customers Safe

One of the most common types of credit card fraud is identity theft. This is when someone steals a customer’s personal or financial information and uses it to make purchases without their knowledge or consent. To prevent this kind of fraud, it’s important to have a secure checkout system in place and to always require customers to enter their billing and shipping information as well as at least one form of identity verification.

Another type of credit card fraud to look out for is when a customer attempts to make a purchase with a stolen or new credit card (which is another form of identity theft). To reduce the risk of this kind of fraud, you should always check that the billing address and zip code provided match the address associated with the credit card. You should also ask for additional forms of identification.

Always be on the lookout for suspicious activity. If a customer is making a large purchase or is attempting to purchase items in bulk, this could be a sign that something is off. Pay extra attention to these purchases, double-check for accuracy, and contact the customer if you feel something is amiss.

You, as the merchant, should also ensure your backups are secure. Data breaches affect more businesses than you think, and mostly because your information is not stored properly. Secure your customer data like credit card numbers, account numbers, and other credit card information in highly secure backups to avoid access and unauthorized charges from skimmers, scammers, and fraudsters.

Finally, we have some tips to provide your customers. Implore them to get a copy of their credit report. Each major credit bureau (Experian, Equifax, and Transunion) offer free credit reports to card holders. Many financial institutions like banks and credit card issuers also offer credit monitoring services that can help credit card account holders mitigate fraudulent charges all while keeping their credit score in check for free.

The best way to prevent your customers and yourselves from being victims of credit card fraud is to stay vigilant. Set up fraud alerts, protect account information, and check your bank statements.

Conclusion

Credit card fraud is a serious issue across the world, but the good news is that there are some warning signs you can look out for to help detect and prevent it. By being aware of the types of fraudulent activities fraudsters might use at checkout, such as identity theft and fake credit account credentials, and following the tips mentioned in this article, you can protect your business from potential fraud.

There are also regulatory measures from the FTC (Federal Trade Commission) like the Fair Credit Billing Act you want to ensure you’re business is meeting the criteria of. Otherwise, you risk facing federal law enforcement.

With the right approach, you can ensure that every purchase is legitimate and protect your customers from becoming victims of fraud. Secure your business today with a PCI-compliant payment gateway and a payment processor that values security over profit. Contact us today to get started.
February 24, 2023
5 Telltale Signs of Credit Card Fraud at Checkout
No one wants to be scammed. Unfortunately, scams happen every day and can result in the loss of money and customers. As a business owner, it is important to be proactive in order to protect yourself from fraud. There are several steps that you can take to protect your business, including being aware of red flags that may indicate a scam is taking place.

Here are 5 telltale signs that your business is facing fraud.

What are the different types of fraud a business can face?

There are many types of fraud in the industry of moving money, but specifically for your online business there are 3 types of fraud you need to pay attention to:

Identity Theft

Identity theft is a type of fraud in which someone’s personal information is stolen and used to open accounts or make purchases without their knowledge. A common example of identity credit card theft is when someone steals a credit card number, makes purchases with it, and then leaves the cardholder to pay off the debt.

There are many form of theft, like phishing, stealing a social security number or using a skimmer to steal card data from a physical card at an ATM or an account number to access that bank info. But taking credit card information and impersonating the cardholder is the most common form of identity theft.

Credit Card Fraud

This includes identity theft if the credit card was stolen and used. But becoming a victim of credit card fraud also happens if a fake credit card is used to make purchases. As in, if the fraudster knows a series series of digits from a credit card issuer or network can work, so they try many combinations until one clicks.

Friendly Fraud

Friendly fraud is the most common type of credit card fraud. It occurs when a customer makes a purchase, is charged for it, but then claims they never made the purchase in order to get their money back from the bank or credit card company. Friendly fraud has become increasingly common online, especially when business names don’t match what appears on a customer’s credit card statement.

Friendly fraud usually happens by accident, but some people make fraudulent purchases on purpose and then request a refund from the bank. This type of fraud has zero risk, zero liability to the cardholder’s credit score or credit report on none of the major credit bureaus (TransUnion, Equifax, Experian).

Red Flags That Signify Your Business Is Being Scammed

Here are the top 5 signs that, as a retailer, your business is under attack by scammers. If you notice any of these happening, take action immediately before you’re out thousands of dollars.

1. Purchasing High-Ticket Products

When a customer purchases high-ticket items, it could be a sign that your business is being scammed. This is because scammers often try to lure businesses in with the promise of big profits, only to take their money and run.

It doesn’t even have to be multiple products, it can also be just one high-ticket item. If there’s a high resale value, then it’s a target for fraud. The scammer can buy the product with a stolen or fake card, receive the item, and then resell it—all without spending a dime.

How to Prevent High-Ticket Fraud

We’ve written previously that simplifying the checkout process down to just the core, required information can help boost conversions. However, that doesn’t apply to high-ticket items.

When a customer want’s a high-ticket item, they’re often dedicated to it. They will try and try and try to get it because they’re committed. So asking for more credit card account information at checkout is a good idea because:
1. More info won’t disrupt the customer experience. Customers buying this item valued at over $1k are certain of their decision. They want the product, so they’re going to buy it. They’ll jump through hoops if they have to. At this stage, there’s no need to convince them to make the purchase; they’re already convinced.
2. More info will secure the sale. When asking for more information like shipping address, address verification (AVS) for billing, the CVV, email, cardholder name, and phone number, it helps you prevent fraud and the customer ensure the accuracy of their purchase. You can use 3rd-party services like 3D Secure, too.
2. Buying Too Many of the Same Product

How often do you see someone buying 20 of the same product? It depends on what you sell, but there’s an acceptable limit of how much any one person can and should be able to purchase without it being flagged as fraud.

Generally, these multiples happen with low-ticket items because the approval rate is better. But losing your entire stock to a fraudulent credit/debit card is not in your best interest.

How to Prevent Fraud with Multiples

Most online shopping carts and ecommerce platforms allow you to set limits on what a customer can purchase.
1. Limit the transaction amount. As in don’t approve transactions that are more than $1k (depending on the unit price of your store’s items). If you typically sell low-ticket items and the average customer order value hovers around a certain amount, then set the order price limit to maybe $50 or $100 above that.
2. Limit product quantities. In the cart, you can set a limit per item. This helps to avoid running out of stock with a single purchase but also prevents scammy purchases from happening.
3. Creating Multiple Transactions with the Same Credit Card or Address

If you notice that one card is used for 10 different transactions, it’s possible that someone has stolen the card number and is running up charges before the card gets flagged.

Fraudsters move fast. They want to spend as much as possible, as fast as possible.

A more competent scammer will have multiple cards—often, a series of cards are reported stolen and can be discovered by researching the last four digits. This same scam can occur with either multiple purchases on the same card or multiple purchases with the same shipping address.

How to Avoid Credit Card Fraud

Your payment gateway is smart. You can go into the backend of it and toggle options on and off, set up safeguards, and more.

That’s what you need to do in this situation. Go into your gateway and tell it to halt more than 2 transactions made with the same card or to the same address.

If these two transactions occur fairly quickly, notify the purchaser that the orders are under review, call the cardholder’s bank or research the card number/BIN, and get informed on if they’re potentially fraudulent transactions.

The same card could be used with multiple new accounts or with different shipping addresses. The subsequent transactions don’t have to mirror the same information.

4. Ordering from Foreign Countries

A sudden influx of orders from foreign countries is another sign of fraud.

If your company sells products online, you may see an increase in orders from overseas countries, especially if you don’t normally ship there. This may be because someone has stolen credit card numbers and placed orders with them in other countries where there is no way for the buyer to dispute them (or get their money back).

If you don’t normally see foreign transactions and rarely ship overseas, this is suspicious activity.

How to Avoid Foreign Fraud

Just like the last solution, you can limit foreign orders in your gateway. Otherwise, you change up the checkout experience slightly when the customer requests to ship outside of your home region.
1. Set more details for foreign transactions. Just like the high-ticket strategy, request as much information as possible.
2. Create order limits for foreign transactions in the gateway. Set a limit to where it can ship, the total order value, the number of orders with that address or card.
5. Using Fake Information at Checkout

Sometimes, flagging fraudulent activity doesn’t have to be a complex, undercover thing.

If a customer makes a purchase and puts in information like (111) 111 -1111 as the phone number, or a string of random letters and numbers in the email field, then it’s probably a fraudster.

How to Safeguard Against Fraudulent Info

During checkout, there are many 3rd-party services you can implement that will help protect you against fraud.
1. Use 3D Secure or 2FA. Forcing the customer (when information seems fishy) to confirm the purchase at the email address or phone number provided can help prevent fraud. That info can further be checked with the cardholder’s financial institution.
Protecting Yourself Against the Current Increase in Fraud Will Save the Future of Your Business

There are other security measures to protect you against fraud along the lines of the outline given above. Things like preventing multiple tries with the same credit card, blocking certain card networks (Visa, Mastercard), and crossing shipping information with BIN info. You should also set up fraud alerts for when these potentially fraudulent charges occur. And absolutely investing recurring unauthorized charges.

There is a rise in fraud between data breaches and payment processor hackers. Don’t become a victim of fraud. Protect your business today with these tips, especially against card-not-present transactions.

For more ways to prevent fraud and protect your business, get in touch with the experts here at DirectPayNet.
September 23, 2022