Credit Card Fraud - Is Online Processing Safe?

By Author: Hugh Springer
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As with most things in life, there will always be someone with a horror story to share about an aspect of business operations. Online credit card payments are no exception. At the same time bear in mind that more than 85% of online transactions are processed on credit cards. If you have an online business, can you really afford to not accept online credit card payments? To help answer the question, "Is online processing safe?" let's look at a few different aspects of fraud risk and online payments. We can focus on what measures you can take to protect yourself. Then you can decide for yourself if processing payments online is worth it for your business.

How Real is the Risk of Fraud with Online Credit Card Payments?

Unfortunately, the risk of credit card fraud increases quite significantly with online payments compared to transactions where the cardholder is present. When the cardholder is in front of you, you can check that the signature on the approval slip matches that on the back of the card. Secondly, if you have reason to suspect that the person presenting the card is not the legal card owner, you can ...
... request additional identification by asking to see their driver's license or ask them to confirm their billing address. You can also pick up if the person using the card appears to be nervous or shifty by their behavior. Compare this to online processing, where all you have are a name and card number. Fortunately, to protect businesses transacting online, card processing companies have developed a number of security measures that helps to reduce the risk.

What are the Security Measures that Help Reduce Online Credit Card Fraud?

The primary task of security measures is to verify that the cardholder is who they say they are. Because there is no face-to-face interaction with the cardholder, online systems rely on information. While the systems are by no means bulletproof, they do reduce fraud risk quite significantly. The type of information requested will be the cardholder's billing address, social security number, telephone number, place and address of work, and name as it appears on the card. These are basic checks. Additional checks include asking for a credit card verification number or CCV. This is generally a three- or four-digit number printed on the back of the card. Some systems then also ask for a unique verification number which will have been set up with the card provider. Another safeguard is to limit the value of transactions that you process on your site. Work out the average value of a sale and set your limit to just above that per transaction. If payments exceed that, ask clients to split the payment into two or three transactions.

How can you be More Aware of Credit Card Fraud Risks?

A big part of fraud prevention is to be able to discern what a genuine transaction is, and what is a potentially risky one? To learn to do this, make an effort to personally read as much information as you can on credit card fraud and the associated risks. Most banking and card processing companies will make this information available to you upon request. Some companies have a call center where you can ask questions or an online FAQ where you can research information. From time to time, banks provide workshops and seminars on fraud prevention and these can provide some valuable information. Research your industry and speak to suppliers, customers and even competitors to gain their insights on fraud prevention. Be aware if your industry is one likely to be targeted by online fraudsters. If you are retailing products online, what security measures do you have in place within your distribution channel to verify that the payment is genuine? If there is a shipping period then this will reduce your risk as you are giving the banks and card processing companies time to check the card details before sending out your products.

How can your Online Card Processing Provider Help in Securing your Online Payment System?

When selecting your online card processing company, check that they have industry accreditation. Research how long they have been in the industry and what their fraud prevention success record is. A good service provider will gladly provide this information and most likely will have a dedicated fraud prevention department. They should have a call center and various security checks in place. Fraudsters are always innovating new ways to access cardholder information so it's vital that your card processing provider has up-to-date technology and systems to combat this.

In conclusion, "safe" is a relative word when it comes to transacting with money. Card payments are convenient and can be traced to a cardholder. From that perspective, it is safer than transacting in cash, however, the risk comes in with verifying the cardholder's details. While transacting online can never be guaranteed to be 100% safe all of the time, technology together with progressive and proactive online card processing service providers have created an environment where businesses can transact with relative peace of mind.
About Author:
At Card Processing Pros.com we provide merchant credit card processing services and debit card processing, literally setting up hundreds of clients per month to process card payments for storefront, Internet and phone/mail order-based businesses. We also offer services in electronic check and gift card processing. Visit online today.