My Merchant Account Blog

Reducing Fraudulent Transactions in ECommerce with the Quantum Gateway

Friday, January 08, 2010

As I was looking back at a few of the posts on here, I noticed that in January 2006 and January 2007, posts were made regarding fraudulent transactions (Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks and Fighting Fraud in your E-Commerce Store respectively were wrote). 

Since the holidays are over, now might be the time to consider taking another look at how your transactions are vetted / scrubbed when a consumer orders your product(s).  The Quantum Gateway is one of the very few electronic payment gateways that offers merchants many options to help prevent fraudulent transactions and chargebacks  (including the Quantum Vault - allowing the merchants to safely secure credit card numbers on the Quantum Gateway's secure servers) at no extra charge.  During the holidays, volume is usually higher on the Internet and fraud also increases.  Merchants are less reluctant to vet / scrub the transactions as they should because this might delay the order process.  People rely on this, especially this time of the year, to take advantage of the merchants.  Now is the perfect time to consider Changing Merchant Account Providers that might have a better electronic payment gateway, like the Quantum Gateway - which has more vetting procedures built into the electronic payment gateway at no extra charge.  This allows the merchant to have the transaction scrubbed before it is even processed, usually saving the merchant a transaction fee (First Data Might Be Overcharging Merchants (on Transaction Fees)).

However, chances are pretty good that you are already vetting the transaction some with Address Verification Service (AVS) and Card Verification Value / Card Verification Code / Card Identification Code (CVV/CVV2 / CVC/CVC2 / CID).  These are some very basic vetting procedures, but the merchant can do a lot more to help protect against chargebacks and fraudulent transactions.  Some of the other ways to vet a transaction:

• Calling Your Customer
• GeoIP
• Verified by Visa and MasterCard Secure Code
• More Options

These security features can be used during the checkout process with no extra time involved from the merchant.  The system will do everything for you - protecting you and saving you time.

Vetting the Transaction - More Options

While you have done quite a bit to ensure the electronic transaction is not fraudulent, you can still do even more.  If you are using MaxMind GeoIP - you should take advantage of the other features it offers.  You can purchase the MaxMind services from the company itself and build this into your checkout process or rely on the Quantum Gateway - decreasing development time and money and possible checkout errors.

The extra features that MaxMind offers include letting the merchant know:

• The transaction is originating from a high risk country
• The user is using a free e-mail address
• The user signs up with a username / password that has been detected as fraudulent in previous transactions
• The transaction is being conducted through a proxy server
• The shipping address is a known mail drop
• And many more options!

Besides no development code being added to the checkout process, the merchant can set the "score" through the Virtual Terminal.  Doing this, this prevents the transaction from being sent to the electronic payment gateway, saving the merchant a transaction fee, on top of a possible chargeback.

Vetting the Transaction - Verified by Visa and MasterCard Secure Code

Personally, we were never supportive of this feature from Visa and MasterCard, known as Verified by Visa (VBV) and MasterCard Secure Code (MSC) - Verified By Visa - MasterCard Secure Code: Things You Should Know.  One of the bigger reasons was because the merchant had to add to the checkout process and a lot of times, this feature would time out on the consumer during the checkout process, and the merchant might lose the sale.  Many merchants had complained about this feature even online and decided against it.

The Quantum Gateway though might have helped merchants by adding VBV / MSC into their gateway.  This requires no extra development, and the merchant can easily turn off this feature at any time in the Virtual Terminal.  This helps the checkout process with the merchant since everything is handled by the electronic payment gateway.

Maestro Branded Card

Another benefit of using MSC allows the merchant to accept Maestro branded cards.  Contact your merchant account provider for more details.

Vetting the Transaction - Card Verification Value or Card Identification Number

Card Verification Value (CVV / CVV2), Card Verification Code (CVC / CVC2) and Card Identification Number (CID) (Card Verification Value - Card Verification Code - Card Identification Number) is / was a way the card associations (Visa / MasterCard / American Express / Discover) came up to help verify the transaction.  It was supposed to "verify" the cardholder had the card in his / her hand during the checkout process.  The card associations told the merchants not to store this number anywhere on their systems, to help prevent hackers from obtaining this number.  Unfortunately within a few months, these numbers were available along with the credit card numbers and billing ZIP code. 

Chances are also pretty good that you, as a merchant, are already using and relying on this feature without even knowing it - just like Vetting the Transaction - Address Verification Service (AVS).

However, electronic payment gateways should still support this feature and should be used when vetting the transaction.  If the numbers do not match, a closer look should be made (Vetting the Transaction - More Options).  If this feature is not offered by the electronic payment gateway consider Changing Merchant Account Providers and / or electronic payment gateways.

The Quantum Gateway is one of the electronic payment gateways that supports and recommends that Internet and Telephone merchants use the CVV2 / CVC2 / CID (Card Verification Value - Card Verification Code - Card Identification Number to help prevent fraudulent transactions and chargebacks.