How To Detect Credit Card Fraud

Credit card fraud is a major problem that plagues online businesses. For the most part, customers accept the risk, recognizing that they have liability protection if somebody uses their card illegally. This protection is available in the form of chargebacks. The merchants end up paying the fees and costs.


The only means of avoiding fraud chargebacks is to recognize or prevent fake transactions before completion takes place.


Credit card fraud continues to increase as technology advances. It's worth noting that the cost to consumers and businesses from this kind of fraud is billions annually. It is also one of the major forms of identity theft.

What is Credit Card Fraud?


This crime occurs when somebody uses your card information to make unauthorized transactions. It can also occur when somebody steals your card or data. Fraudsters can frequently steal huge quantities of money in a brief period.


Often, the fraud remains undiscovered for days. The likelihood of catching the culprit is minimal compared to other kinds of theft. It can occur offline and online in various ways. Owing to the extent of this problem, merchants have turned to fraud detection to deter fraud by identifying it before or while it's happening.


Fraudsters continue to seek new ways of committing illegal activities. Consequently, it has become necessary for businesses and financial institutions to develop superior detection techniques to counter credit card frauds and losses.


In-store Credit Card Fraud Detection Techniques


Fraud detection broadly comprises a set of activities that prevent the acquisition of property or money through false pretences. Most detection techniques blend various datasets to create a connected overview of non-valid and valid payment data for decision-making to take place.


Geolocation, IP address, device identification, and transaction information are some crucial factors which can help in fraud detection.


Let’s discuss some of these methods for in-store credit card fraud detection:


Suspicious Behaviour


Before you process a payment, ensure your sales staff and cashiers watch out for suspicious behaviours as they move within the store and throughout the purchase itself. For instance, you want to watch for agitation or nervousness during the transaction.


Also, you want to be wary of a customer whose purchase is considerably higher than your typical average customer. Or if some buys numerous expensive products at once, without caring for size, colour, or price.


Other suspicious behaviour includes concentrating excessively on his or her signature, rushing the transaction, or delaying the payment. Another behaviour to watch out for is returning immediately for more products upon completing a purchase.


A common sign of fraudulent activity is making a small purchase followed by a huge one. For instance, somebody with a stolen card will purchase gas followed by a major purchase such as a flat-screen TV.


Numerous Purchases


When it comes to online transactions, be wary of a huge number of purchases in a short period. Numerous purchases from a customer in rapid succession is cause for concern.


Credit Card Payment


Another sign of in-store fraud includes payment with numerous credit cards with sequential or similar numbers. You might also want to investigate high transaction volumes on a credit card over short periods.


Inconsistency of Billing Address


When a customer performs an online transaction, you might want to watch for a shipping address that doesn't match the billing address, particularly if you notice that the shipping address is a re-shipper or freight forwarder.


Other signs of fraudulent activity include the apparent distance of the billing address, shipping address, and IP address. Be wary of a billing address that differs from the contact information on file with the issuing bank.


Attempts to Evade Normal Payment Process


You want to watch out for a buyer who tries to avoid your normal payment process, for instance, sending credit card details via email instead of inputting it on your site. When a customer requests you to key the card instead of swiping or inserting it - that could be a red flag too.


Fight Against Fraud


To protect your business from frauds and associated losses, you can do the following:


  1. Incorporate a payments gateway with built-in fraud prevention tools. You'll only need to review the flagged transactions.

  2. Try to be extremely cautious about fraudulent return requests.

  3. Never accept credit cards that are damaged or chipped.

  4. Always validate the ID of the customer with the credit card they present to you before swiping.


This way, you will have less at stake, and at the same time provide assurance to your customers.


To learn how our payment solutions can help you run your business more efficiently, schedule a free consultation with our merchant services team today.

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