Posted by admin on Sep 14, 2012


high risk merchant, high risk merchant accounts, high risk payment processing

How High Risk Merchants Protect Against Fraud

Protecting against fraud is vitally important for high risk merchants

Here are 15 fraud prevention techniques that have proven to be effective.

  • Use current authorizations.  Get a new authorization if the original expires before shipment.  For instance, if a product is on back order, obtain a new authorization prior to shipping to be sure the card is still approved.
  • Enable address verification systems (AVS).  AVS matches the billing address to the address on file for the card.
  • Require card verification codes to verify the card is valid.  The card verification number is the 3 or 4 digit number that appears on the back of the card.
  • Manual review of large orders.  If an order is significantly higher than your normal transaction amount, examine the order for inconsistent information such as mismatched information in different fields or misspellings on cities or states.   For especially large orders, verify orders with the cardholder.  Watch for orders where overnight delivery is demanded since most internet shoppers will not pay extra for a rush shipment.
  • Make sure internal security procedures are maintained on a consistent basis.  Use the latest encryption and firewalls technologies and keep them up to date.
  • Use a descriptor that is easily recognized by customers.  This will help keep chargebacks low because buyers will recognize the transactions.
  • Put fraud-warnings on your site to let customers know that fraudsters will be prosecuted.  Warning buttons or images on your site help discourage fraudulent activity as cybercriminals move on to easier targets.
  • Track delivery of shippable products.  Use shippers that allow for easy tracking, delivery and receipt of packages.  Watch for many orders being sent to the same address as fraudsters often send to “drop addresses” before reshipping goods  out of the country.
  • Encourage customer registration in order to obtain information which can be used in the future to validate a buyer’s identity.  Build profiles of positive transactions which will make it easier to identify fraudulent ones.
  • Build a negative database of information such as names, addresses, IP addresses, phone numbers, etc that have been associated with cases of fraud.  Some payment processors and gateways allow the sharing of negative databases among merchants.  If your processor gives you this option, take advantage of it.
  • For large orders, ask the buyer for the name and phone number of the card issuing bank.  Buyers that don’t know the name of the bank could be using a card which was stolen
  • Implement IP tracing software.  IP software verifies that the address of the buyer’s computer is within 500 miles of the the ship to address.  Combine this with device fingerprinting technology for added protection.
  • Pay special attention to international transactions.  International buyers represent a good opportunity for high risk merchants to increase market share.  But there are areas of world that are associated with very high incidents of fraudulent transactions and it is often wise to block buyers from these countries.
  • Rules based detection software help control fraud.  Rule sets can be based an endless variety of parameters, including locations, past buying patterns, velocity levels, and so forth that can be combined to give a score on the chance of fraud within a given transaction.  Statistical modeling software can be added for additional protection.
  • The card brand websites and the Department of Justice have good information on their sites on how to prevent fraudulent transactions.  Well worth a visit.


Protecting your business against fraudulent transactions is vital to your success.  Guard against fraud by enabling your fraud-fighting tools on your high risk gateway. And implement the the tips in the article to keep your payment processing safe.

Are you a high risk merchant that wants to protect your business against fraud?

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