What are some best practices to minimize the risk of fraudulent credit card purchases on my site?

Did you know if you fulfill an order paid with a stolen credit card number, you may lose both the product you shipped and the money paid? It's true; credit card companies state that you, the merchant, carry the liability burden for fraudulent online credit card purchases.

Credit card fraud is an everyday risk for online merchants. It can never be completely eliminated but can be managed and minimized. This article lists some preventative methods and procedures to help merchants better control their risk to fraudulent orders. It's important that each eCommerce business balance fraud preventative safeguards against barriers which hurt the customer buying experience when defining their order processes.

You have several options before fulfilling an order:

• Require Each Customer's Phone Number During Registration
  The Pulse Commerce system allows merchants to decide if the phone number is a required or optional field during registration. Having the phone number helps you contact the customer if there are any doubts or the need for clarifications (and is used in Pulse Commerce's Credit Card Fraud Detection Module powered by MaxMind).
  
  
• Use Credit Card AVS & CVV2/CVC2/CID Verification
  Most payment gateways allow a merchant to verify and set thresholds to either accept or decline credit card charges based on AVS (address verification) and/or CVV2/CVC2/CID verification.
  
  
• Use Fraudulent Order Risk Scoring and Automatic Fraud Risk Triggers
  Pulse Commerce's Credit Card Fraud Detection Module is powered through MaxMind's order scoring and fraudulent order detection service. Each plan level is issued a number of monthly credits (starting with 500 Standard Frau-risk Scoring Credits per month at the Professional Edition).
  Each order is assigned an Order Risk Score allowing each merchant to review it and decide what actions are necessary. Additionally, each merchant can set what score level will automatically trigger a Fraud order risk flag on the order and incorporate this into their order fulfillment process.
• Leverage Tools and Best Practices when Defining Your Order Fulfillment Processes
  By combining the tools available within the Pulse Commercesystem, merchants should have a policy to quickly identify which orders warrant additional scrutiny.
  Once an order has been determined to be more risky or suspect, place the order into an On Hold or Pending Review order status so it isn't accidentally shipped until verified by the additional checks. Use Pulse Commerce's Email Template functionality to quickly email the customer explaining additional checks are being performed to reduce fraudulent orders.
  Balance is key because additional checks create an extra step for both you and the customer.
  It's important to note that most credit card thefts are reported within 24 hours but it can take an additional 24 hours for that number to be included in the databases used by card processors.
  
  
• Review the Order Information and Customer's Order History
  The Pulse Commerce system allows merchants to quickly see a Customer's Order History at the top of the order view and order details pages. It's unlikely that a customer with a history of 100 successfully shipped orders is fraudulent (unless the customer's account has also been compromised).
  Check the order data to determine if the customer appears to be a legitimate buyer. Check if the billing and shipping addresses are different, if the zip code really exists and if the customer's e-mail address is formatted properly. Check if any fields appear bogus (e.g., Mr. Smith or John Doe) for the customer's name or an address like 123 Main Street.
  It's important to note that orders with expedited or overnight delivery might be riskier (increased cost isn't a concern to a criminal who isn't really paying). It's a good idea to require a signature for orders shipped overnight. The fraudster may be using an innocent person's house as a drop-off point.
  
  
• Call the Card-Issuing Bank
  If you suspect an order, call the card-issuing bank. To simplify this step, merchants with Premium Fraud-risk Scoring Credits for Credit Card Fraud Detection Module powered by MaxMind receive both the Order Risk Score (helping to identify which orders warrant this step) AND the card-issuing bank's name, phone number, and country of origin.
  You can ask the card-issuing bank to make a courtesy call to your customer to verify the charge.
  When you call the card-issuing bank, have the following ready:
• your merchant number
• your phone number
• the customer's full name, address, and phone number
• date and time of the credit card authorization
  
  
• Call the Customer
  Sometimes the fraudster will provide the actual phone number of the person whose card was stolen. If the cardholder did not authorize the charge, suggest that they call their credit card company to report their card as stolen.
  
  
• Call your Merchant Account Provider
  Once you have confirmed an order is fraudulent, contact your merchant account provider as soon as possible. Merchants with a high number of chargebacks will likely be considered higher risk and be charged higher processing fees.
  
  
• Education & Preparedness
  Educate yourself by attending a seminar offered by credit card companies and card processors. Fraudsters need to have their transactions approved, and take delivery of the goods before the fraud is discovered. Knowing their techniques and best practices will help you define order processes to minimize your risk.