Fraud & Risk Management Services

Risk Management is a critical add-on in the Payments Cycle. If Online Fraud is not detected, filtered, blocked and reported on a continuous basis, Merchants may end up loosing thousands of dollars to potential Fraudsters or Internet hackers. Thankfully! Fraud detection tools identify the probability of risk associated with transactions or validate the identity of the purchases, providing greater confidence and peace of mind to Merchants.

Frauds can be of varied types such as Skimming, Phishing email (aka spoof or hoax), Theft and Misuse of Card details, Hacking Internet Passwords etc. One very common result of a Fraud is a Chargeback. Cardholders can dispute a transaction after a purchase is made. Such a dispute is called a 'Chargeback'. A Chargeback is an inevitable risk of credit card processing for merchants.

Some of the very commonly listed Fraud detection tools are,

• Address Verification Service (AVS)
• Card Verification Number
• Payer Authentication/3D Secure (Verified by Visa)
• Order Screening/ Automated Decisions
• Velocity Monitoring

AVS (Address Verification Service) is the most common tool used by Merchants to verify/validate a customer's/cardholder's billing address. AVS is widely used in a Card-not-Present scenario such as in Mail Orders, Telephonic Orders or when the Customer asks you to ship products to them. In AVS, when you process a card transaction, you can enter your customer's billing address to verify its accuracy. The address you enter is the customer's billing address. You will see the results of the AVS on the screen after your transaction is submitted. If the address or part of the address doesn't match, the transaction will still be completed. However, if you are uncomfortable with the results, you may immediately void the transaction. The address you submit is validated with the address that the card-issuing bank has on file for the cardholder. This check will return an Alpha code to you that show's how well the addresses match up.

By verifying the address of a customer, you are bound to minimize the level of risk. If the address doesn't match, you can simply void the charge, contact your customer to get the correct address, and then re-submit the transaction.

AVS is subject to a significant rate of "false positives" which may lead to rejecting valid orders as well as missing fraudulent orders. If the cardholder has a new address or a valid alternate address (such as seasonal vacation home), this information may not be up-to-date in the records of the cardholder's issuing bank, so the address would be flagged as invalid. Merchants typically do not rely solely on the AVS result to accept or reject an order.

The second most commonly used Fraud Detection Tool is the Card Verification Number. Card Verification Number (CVN) is also known as CVC2(MasterCard), CVV2(Visa) and CID(American Express). The CVC2, CVV2 and CID are three or four digit number located on each card. For Visa, MasterCard, and Discover it's located on the signature strip on the back of the card. For American Express it's located on the front of the card. The Merchant can request enquiry of collect this number and enter it when processing a transaction. If the number does not match, you should consider rejecting the transaction.

3D Secure is an authenticated payment environment that requires the Issuer to be participating, the Merchant to be participating and the cardholder to have registered for the process with their Issuer. In essence, all involved parties have to be enabled, to support the 3D-Secure transactions. The 3D framework requires the Banks to be capable of providing their Cardholders and Merchants the Authentication Methodology, without binding them to any specific underlying technology.

The primary benefit of 3-D Secure for Merchants is the reduction in disputed transactions and the resultant exception handling expense and losses. It is expected that nearly 80% of all e-commerce charge-backs, and a substantial proportion of customer complaints, could be eliminated with the use of Authenticated Payment. This will have a positive impact on Merchant profitability.

A less tangible, but nevertheless real, benefit is the assurance Issuing Banks can provide to their cardholders who are considering e-commerce transactions. Studies indicate that as many as a third of cardholders are afraid to shop online due to security concerns. Authenticated Payment may convince prospective shoppers that it is safe to use their card online.

Another benefit of 3-D Secure to the Acquiring Banks is the potential to leverage the existing infrastructure to support other financial and banking related applications.

Automated Order Decisioning/screening is a most like alternative that Merchants prefer to adopt as a Fraud Detection Tool. Incoming Orders are evaluated in Real-time to detect the possibility of a fraud. A Workflow Rules Engine provides the basis for automation and determines whether a transaction needs to be accepted, rejected or suspended for further review. If necessary, Manual review takes place.

Velocity in the payments context denotes the frequency of the number of transactions and amount of transactions that are performed in a given period of time. Velocity is monitored across multiple characteristics such as mailing address, geography, telephone no and email address. Velocity is monitored against a given threshold limit for the below causes:

• Orders/Transactions related to a single card used over a period of time such as hourly, daily, weekly etc.
• Frequency of Orders/Transactions made on Multiple Cards on the same delivery address
• Frequency of multiple Orders with different names, expiry, addresses and card no's but from the same IP Address
• Frequency of Orders from the same URL