In Brief
Preventing Fraud: The Rules at a Glance
The difference in how 'card not present' transactions are treated has led to online merchants having a greater exposure to credit card fraud than brick-and-mortar retailers
By Sarah D. Scalet
February 01, 2006 — CSO —
The difference in how "card not present" transactions are treated has led to online merchants having a greater exposure to credit card fraud than brick-and-mortar retailers.
Brick-and-mortar stores
Method: Customer hands over credit card.
Fraud prevention: Merchant gets signature and can ask for ID. Card may be swiped so that bank can verify information hidden on the card.
Merchant's risk: Low. If the customer disputes the charge, the bank accepts responsibility.
Anomaly detection: Done by credit card associations and banks, which monitor cardholder accounts for markers of fraud.
Vendor: Fair Isaac
Online and telephone sales
Method: Customer gives merchant credit card number.
Fraud prevention: No signature. Merchant may ask for card verification number or other information.
Merchant's risk: High. If the customer disputes the charge, the merchant accepts responsibility. Merchants also cope with "friendly fraud," in which a customer falsely denies having placed an order or receiving goods.
Anomaly detection: Done by merchants, who monitor incoming orders for markers of fraud.
Vendors: CyberSource, eFunds, Retail Decisions
Other stories by Sarah D. Scalet
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