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Fraud Prevention In Online Payment Processing

May 13, 2013

Fraud Prevention In Online Payment Processing

May 13, 2013

As technology advances, thieves are constantly discovering new tricks and loopholes to steal personal data. One of the most common areas that thieves are focusing on is credit card fraud when it comes to online payment processing. Since the largest number of credit card transactions takes place online, web-based fraudulent activity has become extremely attractive. Therefore the arms race between online security and personal data collectors is an ongoing one. And companies all over the world are required to take proper precautions when processing credit cards both in stores and especially online.

While it can sometimes seem impossible to stop credit card fraud from happening, you might be pleasantly surprised to know that there are some steps companies can take to minimize the risk. Don’t wait until after a situation has occurred to start thinking about prevention, start now with these helpful tips.

  • Don’t store credit card numbers on-site: Having customer information can be very beneficial for marketing and customer service purposes. However, there is certain information that is best left alone. Having a database of credit card numbers makes a company much more attractive to credit cards thieves. Instead, consider having your provider keep any credit card information on the cloud or stored offsite in a fully encrypted database.
  • Address issues immediately: Whether your records have been breached or someone is attempting to make an online purchase with a stolen credit card, timing can reduce the amount of collateral damage or even prevent any damage from occurring if it is discovered soon enough. Some actions that can be taken include placing a hold on the purchase if an order seems strange, contacting the proper authorities, and attempting to find the source of the issue. The longer an issue with fraud is put off, the more difficult it becomes to trace and eradicate.
  • Utilize IP and Geo tracking: It is a very common occurrence that someone attempting to use a stolen credit card to purchase items online has an IP address from a different country than where the credit card is from. This is because they typically don’t have a physical card, they only have the data. With more advanced IP and Geo tracking that companies like Amazon or eBay use, any geographical discrepancies can be found and addressed. This doesn’t mean that every time an IP address is in a different country than the billing address fraud is occurring. But you should be aware that it is a red flag that should be looked into.
  • Require full address and CVV: Asking for information that a thief may not have will deter them from using stolen cards on your site. The CVV number is physically printed on the back of credit cards so it’s not uncommon for a thief not to have this number. Requiring full addresses is another method that can potentially help prevent thieves from using fraudulent card information on your site. However, there is a tradeoff that will have to be considered. One recent study showed that asking for a full address and a CVV number can decrease checkout conversions by as much as 40%. Companies have to decide if the potential lost revenue outweighs the possibility of preventing fraud.

Fraud prevention may seem difficult, but it is a necessity. When thieves use stolen credit cards to purchase products online, the real cardholder will do a chargeback to get the funds back into their account. When a company continuously has chargebacks occurring, it negatively affects its reputation. Consumers are aware of these issues and don’t feel comfortable doing business with a company that is associated with any type of online fraud. Take all the necessary measures to ensure your company doesn’t fall victim to cyber thieves.


Eran Feinstein is the founder of 3G Direct Pay Limited.  3G provides global e-commerce and online payments solutions for the travel and related industries  He is a leading authority in the fields of e-commerce, travel and payments, having acquired extensive experience from various parts of the world.

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