Guide to Improve Credit Card Fraud Detection

JetPay Communications

February 26, 2019

According to a study performed by Javelin Strategy & Research, fraudsters cost cardholders $16.8 billion in 2017. While those losses are serious, the situation is even worse for merchants who may be saddled with chargebacks, lost inventory and potentially devastating regulatory fines if they are not industry compliant.
To protect their interests, merchants need to be aware of the different types of credit card fraud that are popular among thieves and how they can detect possible incidences of fraud and take action.

Different Examples of Credit Card Fraud

Point-of-Sale Fraud

Point-of-sale (POS) credit card fraud is committed when a thief uses a stolen or duplicate card to make unauthorized purchases in the retail space. To address this issue, the major card brands introduced new EMV cards that protect payment data by storing it in an embedded encrypted microchip. With the introduction of the EMV technology to the U.S. marketplace, rates of POS card fraud have greatly declined but haven’t gone away entirely.

Account Takeover Fraud

Account takeover fraud occurs when thieves gain access to someone’s private information (address, Social Security number, etc.) and use it to either take over one of their existing accounts or opening a new one in their name. The rising popularity of electronic payment applications, which are uniquely vulnerable to account takeover, have led to a recent increase in this type of fraud. In many cases, account takeover fraud is only discovered once a victim notices discrepancies in their monthly statements or receives a statement for an account they didn’t open.

Card-Not-Present Fraud

Card-not-present (CNP) fraud occurs when a transaction involving stolen payment data is made without the card being physically present at the point of sale. CNP fraud can be committed over the phone, through the mail or online. Because EMV technology makes POS credit card fraud extremely difficult, thieves have pivoted to making a lot more unauthorized transactions online. In fact, Javelin reported an 81 percent increase in online card fraud from 2016 to 2017.

How Merchants Can Detect and Stop Credit Card Fraud

Best Practices

  • One way that merchants can detect and stop credit card fraud is by instituting best practices that make it more difficult for thieves to defraud them. Recommended best practices include:
  • Checking ID with all large card purchases at POS
  • Enable capture of card verification values (CVV) with all CNP transactions
  • Flag international orders from high fraud risk countries and regions
  • Set a flat maximum dollar amount for all card sales

Maintain a Blacklist

A blacklist is a record of information related to previous incidences of fraud or attempted fraud. With this information, companies can create a database that will flag new orders that contain information used in previous unauthorized transactions.

Partner with a Quality Payments Processor

Another proven way organizations can bolster their credit card fraud detection efforts is to partner with a quality payments processor like JetPay. With decades of experience processing payments for companies in a wide range of industries, we’ve developed tools that allow merchants to accept all payment card types easily and securely.
Our credit card fraud detection and prevention tools include:

  • Prevention Alert Networks: Thanks to our corporate partnerships, we have access to prevention alert networks Verifi and Ethoca. With these networks scanning your sales data, your chargebacks can be stopped before they happen.
  • Root Cause Analyzers: Our root cause analyzers automatically detect and identify chargebacks in real time using more than 40 different data points. As a result, our partner companies can experience a 15 percent reduction in chargeback rates.
  • Frictionless 3D Secure: Using cutting-edge 3D Secure 2.0, our customers can get frictionless real-time validation of their transactions via communication with the cardholders’ bank. This tool has the capability to reduce chargebacks by much is 10 percent.

Additionally, we protect our partner organizations from hackers and other unauthorized individuals directly with robust data security features. Once new card data is captured, it is locked away by our PCI-compliant algorithms and encryption. That sensitive information is then replaced locally with a unique token that can’t be reverse engineered. That way, you can process single or recurring charges safe in the knowledge that any fraudsters who access your systems won’t find any usable payment data.
By entrusting JetPay to protect your company from credit card fraud, you’ll be able to lessen your chargeback rates, reduce your PCI overhead, migrate more of your backend processes to the cloud and assure your customers that their sensitive information is well protected. Contact us today to take control of your payment processing.

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