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Avoiding credit and debit card fraud |
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Written by TD Canada Trust Merchant Services
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Retailers need to be aware that
obtaining an authorization number
for a
transaction only confirms that
funds are available on the card,
says van Duynhoven.
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With billions of transactions taking place in Canada each year, debit and credit cards are an essential part of everyday life. In an effort to help retailers combat fraud, Jeff van Duynhoven, President, TD Merchant Services, provides advice and tips to help retailers avoid debit and credit card fraud.
One type of fraud that retailers fall victim to is card-not-present fraud. This type of fraud refers to transactions that occur without the presence of the actual cardholder or their credit card. Customers provide only a credit card number over the phone, online or by mail. While the vast majority of the these transactions are done by legitimate consumers, because the card is never presented to retailers, there is no way of checking its validity using the various security features of the card itself, and as such retailers should be aware of some of the potential risks and tools available to them.
Card-not-present fraud is the fastest growing type of fraud in Canada, says van Duynhoven. We hear stories too frequently about merchants falling victim to fraud and being responsible for chargebacks which could be thousands of dollars.
Some helpful fraud prevention practices to follow in a card not present environment include, but are not limited to the following:
- Retailers should use additional care when requests include unusually high dollar amounts, special requests, or any order which involves an out-of-the-ordinary situation such as an international order from a new or recent customer.
- Be extra cautious if order involves any of the following:
-Orders placed using numerous credit cards transaction is split between several credit card numbers.
-A shipping address that is different from the cardholder address, especially where the countries differ.
-If the address is a P.O. Box in a large city, further checking is suggested, especially if the order is from a new customer.
-Unusually large quantities, high-value items or multiples of the same item especially if they are to be shipped rush or overnight. Be especially alert when the caller appears ready to order whatever merchandise is in stock, regardless of size or style.
Additionally, to help avoid card not present fraud retailers can approach their acquirer and obtain tools such as Address Verification Service and the use of Card Security Codes (the three-digit security code that appears on or to the right of the signature panel on the back of the card) to help verify a cardholders identity in real time and provide business owners some added comfort when performing card not present transactions. However, these still cannot eliminate all instances of fraud and chargebacks.
Most importantly, says van Duynhoven, retailers need to be aware that obtaining an authorization number for a transaction only confirms that funds are available on the card. It does not confirm that the legitimate cardholder authorized the transaction, nor will it prevent a chargeback.
Another common type of fraud is skimming. In an effort to combat card skimming and the production of counterfeit cards, the payment industry in Canada is transitioning to a new generation of payment card technology, known as chip. Chip technology will significantly reduce card skimming and the production of counterfeit cards.
van Duynhoven offers these steps for retailers to take to prevent skimming:
- If a customer has a chip card and your point of sale terminal is chip capable, remind your customer to insert the card. Avoiding an unnecessary need to swipe will reduce the potential of your customer's card being skimmed.
- Treat your PIN pads like cash. Keep PIN pads out-of-sight when not in use, and lock them up at closing.
- Inspect your point of sale equipment regularly including serial numbers, wires and cables. If any equipment looks unfamiliar, appears altered, or is missing, notify your acquirer immediately.
- Check ceilings, walls or shelves near PIN pads for holes that could conceal a small camera.
- Install your debit terminal so that customers have enough room to comfortably shield the PIN pad when entering their PIN number.
- Make sure that any security cameras on your premises dont capture customers entering a PIN.
- Keep all transaction records on file (for the length of time specified in your processing service agreement), along with employee shift schedules and supplier information.
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