| p>This article talks about a very important issue for | | | | isn't always reliable; bad results can be triggered |
| Internet merchants . . . preventing online fraud. Most of | | | | unnecessarily because people move, or because |
| the attention in the press surrounding online fraud is | | | | some people report five-digit zip codes and some |
| focused on consumers...whether its having their credit | | | | report nine-digit zip codes. This may generate a |
| card numbers stolen by hackers or being suckered | | | | response stating that the address matches, but the zip |
| into giving their personal and financial information by a | | | | code does not match.oThe AVS system can't handle |
| phony email phishing scam. But barely any attention | | | | addresses outside the U.S., so if you decide to ship |
| has been given to the other side of the coin...the | | | | only to addresses with good AVS results, you will rule |
| Internet merchants who are defrauded by crooks | | | | out all international orders. |
| posing as legitimate consumers. | | | | Online merchants typically do not rely solely on the |
| One of the first things you need to do as a merchant | | | | AVS result to accept or reject an order. Most online |
| to prevent fraud is to always verify who the | | | | merchants use the address verification service as part |
| consumer is. On card-present transactions, this can | | | | of an overall fraud prevention program and in |
| easily be done by asking for a valid photo identification | | | | conjunction with several other tools to help them |
| card, for example, a driver's license or state issued ID | | | | prevent fraud. |
| card. On card-not-present-transactions, this is a much | | | | Now we'll talk about the second step in basic fraud |
| more difficult task for the merchant to accomplish. | | | | prevention - Card Code Verification |
| There are two basic steps that every online merchant | | | | To help reduce fraud in the card-not-present |
| should follow to ensure that the consumer is legitimate. | | | | environment, credit card companies have introduced a |
| The first step in preventing fraud in a card-not present | | | | card code program. Visa® calls this code Card |
| environment is called address verification or AVS. The | | | | Verification Value (CVV); MasterCard® calls it |
| consumer should be required to enter their billing | | | | Card Validation Code (CVC); Discover® and |
| address when they are filling out their credit card | | | | American Express call it Card ID (CID).. The card code |
| information. The payment gateway will then send this | | | | is a three- or four- digit security code that is printed on |
| information to the payment processor for verification. | | | | the back of cards. The number typically appears at |
| The payment processor will then pass the address | | | | the end of the signature panel. This program helps |
| information to the issuing bank who will then match that | | | | validate that a genuine card is being used during a |
| information with the address information they have on | | | | transaction. Card code verification works similar to |
| file for that card. The payment gateway will then send | | | | address verification. The payment gateway passes |
| back some codes to let you know whether or not the | | | | the code entered by the consumer to the payment |
| AVS was a match. AVS only compares the street | | | | processor who then compares it to what is on file at |
| number and ZIP code against the information on file | | | | the card issuing bank. The payment gateway then |
| with the card issuing bank.. So if the street address | | | | returns a code to let you know whether the numbers |
| was 1234 Main Street and the ZIP code was 90210, | | | | matched. This helps to verify that the person using the |
| the transaction processor would compare 1234 and | | | | card has the card in their possession at the time they |
| 90210 with the issuing bank's information. | | | | place the order. |
| Once this process is completed, you will get an AVS | | | | We advise all merchants to require this code for all |
| code that tells you how well the address matched the | | | | credit card transactions to help combat fraud. It is |
| bank's records. If you get an AVS code indicating that | | | | important to note however that these numbers can be |
| the address and/or zip code do not match, it is up to | | | | obtained by fraudsters just as credit card numbers are |
| you to decide whether you wish to accept the risk | | | | obtained if they are stored by the merchant. It is for |
| and ship the goods to the customer. We recommend | | | | that reason that the card associations prohibit |
| that you do not ship goods in cases where the zip | | | | merchants from storing these codes in their |
| codes do not match. This will not only help to prevent | | | | system.The use of CVV2, CVC2 , and CID by online |
| chargebacks but will also prevent problems from | | | | merchants has continued to increase, rising from 44% |
| occurring if the consumer works during the day. The | | | | of online merchants using this tool in 2003 to 66% |
| shipping companies have become so inundated with | | | | today. It appears that asking for the CVV2 , CVC2, |
| packages from the ever-growing Internet world that | | | | and CID has become standard practice for the |
| they will drop the package at the door, often times not | | | | majority of online merchants. |
| waiting for a signature. Without a signature, you do not | | | | So there you have it. Two very basic and easy fraud |
| have proof of delivery. And without proof of delivery it | | | | prevention tools that every online merchant should use |
| is very hard to fight a chargeback. | | | | to prevent fraud and eliminate chargebacks. |
| It is important to know that AVS has some limitations, | | | | Copyright 2007 Loud Commerce, LLC. All Rights |
| because this may impact your decision-making about | | | | Reserved. |
| how to treat bad verification results:oThe AVS system | | | | |