payment gateway fraud detection
  • How Payment Gateways Protect Invoicing Software from Online Fraud

  • Published By:
  • Category: Finance
  • Published Date: August 21, 2020
  • Modified Date: August 21, 2020
  • Reading Time: 5 Minutes

Featured Image Caption: Payment Gateway Fraud Detection

As someone who is running a startup business, you wouldn’t consider stuff like online fraud as an alarming problem. It’s just right, considering that you’re only processing around ten to fifteen transactions per day. However, the moment your business scales to 500-plus transactions per day is also the time you realize that online fraud is a serious case that needs attention. This stage features you accepting credit cards and other modes of payment. So disregarding caution will prove to be very risky and expensive.

Let’s consider the numbers. In 2018, US-based merchants lost an estimate of 6.4 billion dollars in payment card fraud loss. Small businesses, in particular, have suffered the most when it comes to fraud; with a rough estimate of 155,000 dollars a year. So just by looking at these numbers, you can already tell that online fraud is a significant issue that’s getting more and more serious as the years go by. That’s why as early as right now, you need to do something about it. It’s time for you to establish a safe and secure payment gateway system that can detect and prevent online fraud.

Most credit card processors offer only basic security measures to reduce credit card fraud. Some; like PayPal, do not provide seller protection at all, especially in the sale of online products and services. That’s why before you choose a payment gateway, make sure you determine their security features and their manner of protecting your business in the event of a fraud transaction.

The digital industry is evolving at a rapid pace. That’s why you must re-evaluate your strategy when it comes to fraud management. Using effective techniques when it comes to dealing with card payment fraud will minimize the losses due to it.

To help you understand the true value of payment fraud detection systems, let’s look at a few ways that it can detect and reduce any online fraud-related loss.

Address Verification Service (AVS)

Address verification service is an effective security measure for detecting online fraud. Once customers purchase items from you, they will need to provide their billing address and ZIP code. An AVS system will then verify if this address matches with what the card-issuing bank has on their file. A part of the card-not-present transaction, the payment gateways system can also send a request for user verification to the issuing bank.

An address verification service responds with a code that will help the merchant determine if the transaction has a full AVS match. If they don’t more investigation will be carried out by checking the card verification value (CVV), email address, IP address where the transaction was made. If none of these options can verify the integrity of the transaction, the payment gateway system will decline the transaction completely.

Card Verification Value (CVV)

Speaking of CVV, this method can also help determine the authenticity of a card payment. The CVV is a three or four-digit code that’s present on every credit card. The code shouldn’t be stored on the merchant’s database. The CVV acts as an added security feature, allowing only the cardholder to use the card since it’s available only on the credit card and nowhere else.

Once an order is made and the CVV doesn’t match, the payment gateway system will decline the entire transaction. While making a card-not-present transaction (either through online, email or telephone), the merchant will get the card information from the customer to assess and verify the transaction.

Friendly fraud is a risk associated with card-not-present transactions, which can lead to a potential chargeback. That’s why enabling a CVV filter is essential as it can help prevent fraud and reduce chargebacks.

Device Identification

Device Identification analyzes the device that’s been used for the transaction rather than the person visiting your website. It will profile the operating system, browser, and internet connection to determine if the online transaction is legitimate. From their analysis of the device, they will then determine if the transaction goes through, needs to be flagged, or declined completely.

Keep in mind that all computing devices (computers, phones, tablets, etc.) possess a unique device fingerprint. This fingerprint is similar to the fingerprints of people. It will then help identify fraudulent patterns and assess risks if any.

Flag Large Transactions

Finally, we also have payment gateways systems that flag large transactions. With stolen card information, fraudsters will make the most of the moment by making large transactions before the card is blocked by the banks. This can cause harm or damage your business since you’ll have to bear the cost of allowing a fraudulent transaction to go through. It can also provoke a payment processor to discontinue your processing account, which would be a huge hit to your business.

That’s why limiting large transactions by specifying a flat dollar amount is essential. Not only can you prevent fraudsters from taking advantage of their stolen card information, but you will also avoid any potential chargebacks. At the same time, you can limit the instances of failed transactions that go through the payment gateway.

These are just some of the reasons why a payment gateway system is essential for any business. So if your business doesn’t have a payment fraud detection in place, it’s about time you focus your priority on getting one.

Ossian Rey

By Ossian Rey
who is a Digital Marketing Consultant at ReliaBills that helps businesses getting paid on time. Loves milk and small chat.

Member since August, 2020
View all the articles of Ossian Rey.

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