12 Signs of E-Commerce Fraud
There are certain e-commerce transaction characteristics that are statistically very likely to be present when fraud is being committed. These risk signs vary from one organization to another, depending on a multitude of factors, so merchants should compile their own lists and update them over time.
Listed below are 12 of the most common risk characteristics, the presence of which should alert merchants operating in a card-not-present environment to the possibility that a fraudulent transaction may be under way. If only one or two of these signs are present, this may not be a cause for concern but if several are identified in a single transaction, the merchant should investigate and verify the validity of both the card and the cardholder before processing the payment.
- First-time shoppers. Criminals are always looking for new victims. Once they commit a fraud at one merchant, they usually move on to another and never come back.
- Larger-than-average orders. Stolen payment cards have a very limited life span so criminals need to make a quick use of them. Large-size orders are one way of doing that.
- Orders for several items of the same kind. Just as with larger-than-average orders, purchasing multiple items of the same kind is a way of maxing out stolen cards as quickly as possible.
- Big-ticket items. Big-ticket items have high resale value, maximizing the fraudsters’ profits.
- Orders with overnight delivery. Naturally, criminals do not much care about shipping costs and are more likely than legitimate shoppers to order items with an overnight or another type of a rushed delivery.
- Orders from internet addresses at free email services. Free email services have no billing relationship with their users, leaving no possibility for verification that a legitimate cardholder has opened the account.
- International shipping addresses. A substantial number of fraudulent transactions are shipped to international addresses. The Address Verification Service can only work for U.K. addresses outside the U.S.
- Similar account numbers. There are various software tools for generating card account numbers, such as CreditMaster. These numbers are often very similar.
- Multiple orders shipped to the same address. Such orders may indicate the use of a stolen batch of cards or of fraudulently generated account numbers.
- Multiple transactions on one card in a short amount of time. Such transactions may indicate that a criminal is attempting to run up a stolen card’s credit line as quickly as possible, before the account is closed.
- Multiple shipping addresses. Similarly to the previous scheme, a card may be used multiple times in a short amount of time with the orders going to several shipping addresses.
- Multiple cards from a single IP address. Such transactions may indicate multiple orders placed from the same computer, even if different names and shipping addresses have been used.
Says:
May 30th, 2010 at 11:17 am
[...] the street address nor the ZIP code matches. This is a strong indicator of a potential fraud and you should investigate [...]
Says:
May 30th, 2010 at 4:29 pm
[...] or not. By itself, each one of these high risk characteristics is rarely a clear signal of fraud. If, however, a transaction displays several of them, there is a good chance that it is fraudulent. [...]
Says:
May 30th, 2010 at 4:46 pm
[...] CVC 2 is not valid. View this result as a very strong indicator of fraud. It may, however, be the result of a key-entry error, so you may consider resubmitting the CVC 2 [...]
Says:
May 30th, 2010 at 5:32 pm
[...] are present throughout the processing of the payment, which substantially reduces the risk of fraud. A face-to-face processing setting allows the merchant to examine the card’s security [...]
Says:
May 31st, 2010 at 7:58 am
[...] merchants are much more vulnerable to credit card fraud than their store-front counterparts and need to go to much greater lengths when evaluating the [...]
Says:
May 31st, 2010 at 10:11 am
[...] gets its money, the processor is also fully liable for the transaction amount, in case of a fraud or a chargeback. While any fees resulting from fraud and chargebacks are typically passed on to the [...]
Says:
May 31st, 2010 at 11:04 am
[...] merchants should be investigated. It is, after all, in the issuer’s best interest to prevent fraud from occurring, as it is liable for the fraudulent amount, while the cardholder is [...]
Says:
May 31st, 2010 at 11:54 am
[...] chargebacks are not always caused by fraud or processing errors or otherwise caused by an inadequacy in the merchant’s sales processing [...]
Says:
June 4th, 2010 at 7:41 pm
[...] that your business always takes for such types of transactions to protect cardholders from fraud. Always report suspicious activity to your processing [...]
Says:
June 6th, 2010 at 12:23 pm
[...] a first step, identify the high-risk countries that are heavily involved in e-commerce fraud. There are many resources you can turn to for help with that, including your payment [...]
Says:
June 7th, 2010 at 5:44 pm
[...] Call the cardholder to confirm the transaction and resolve any discrepancies that may still remain. Tell your customer that this confirmation is performed as a protection against fraud. [...]
Says:
June 7th, 2010 at 7:04 pm
[...] are infamous in the payment card industry for producing some of the highest levels of credit card fraud, especially in card-not-present transactions. So infamous in fact, that most U.S.-based payment [...]
Says:
June 16th, 2010 at 6:45 pm
[...] Match – N. Neither the street address nor the ZIP code match. Typically a strong indicator of fraud, however the cardholder may have moved recently and not yet notified the issuer or the cardholder [...]