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Fraud Red Flags

fraud red flags

The Top 20 Card-Not-Present Fraud Red Flags

Though credit card fraud is a threat to all merchants, card-not-present (CNP) business models are the most vulnerable. But, as the saying goes, an ounce of prevention is worth a pound of cure. That’s why you need to know all you can about these common “fraud red flags,” as well as actions to take when fraud is suspected.

Credit Card Fraud is On the Rise

Recent studies revealed some troubling information: card-not-present fraud is rising at a drastic rate, especially since the mass adoption of EMV "chip" cards.

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fraud stats
fraud stats
fraud stats

47% of merchants believe fraud is inevitable, while 20% think it costs too much to control. Of course, both beliefs are incorrect. Preventing chargebacks caused by card-not-present fraud is vital to protect your bottom line, but you may not really understand how to go about it.

To spot potential credit card fraud, experts have identified specific fraud red flags that may give merchants cause for suspicion. By themselves, none of these warning signs necessarily point to a problem. Large purchases, for example, arenot necessarily signs ofa full-scale fraud issue, but at the same time, it's critical that you recognize the potential events warranting further investigation.

We’ve compiled a list of the most common fraud indicators in the CNP environment. They are grouped by type for easier identification:

Online Ordering Antics

Sometimes the order itself can be a clue to attempted fraud.

New Customer Orders

Gaining new customers is great…unless they're not really customers. You should pay close attention to first-time customers; fraudsters are always on the lookout for a new victim.

Larger-Than-Expected Orders

Any orders significantly higher than your average transaction should be considered suspicious. Criminals with a stolen card number only have a limited time frame before the theft is discovered, so they often try to buy as much as they can in one shot.

Repetitive Orders

If you receive an order that has a lot of the same item but in different colors or sizes, proceed with caution.

Orders of Big-Ticket Items

Again, because of that limited window of opportunity, crooks often go for the items with the biggest resale earning potential.

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Multiplying Your Problems

It's a tip-off whenever multiple different orders are somehow linked.

Same Shipping Address, but Different Cards

It’s a sloppy tactic, but not uncommon. Multiple orders with mismatched payment information could signify a thief trying to use a collection of stolen cards while they’re still active.

Same Account, but Different Shipping Address

Some criminals have been known to share card numbers with friends, or order items for them. This is an especially popular ploy during the holidays, when merchants expect regular cardholders to buy gifts and ship them to others.

Different, but Similar Card Number

A thief might have scraped a list of credit card accounts and placed orders on each card in rapid succession.

Same IP Address

Orders with two different cards originating from the same IP address could be normal activity. Any more than that—especially several orders around the same time—should be considered suspicious, though.

Multiple Cards Used for One Order

If a buyer wants to use several different payment cards on one large order, that may be an indicator of “card testing.” A fraudster might be using the order to find which cad numbers will be approved.

Transaction Trickery

Small errors when placing an order raise the likelihood that the customer doesn't have full access to a credit card.

Reattempting With a Smaller Amount

When an order is flagged as potential fraud and declined, the thief may quickly attempt to purchase something else that costs less. This is another form of card testing, by which the merchant tries to identify the limit and available balance of the account.

Guessing the Expiration Date

Most card-not-present purchases require the credit card expiration date. If the date entered first is wrong—and the customer tries again with a new one—there’s a chance the buyer doesn't have access to the physical card and is trying to guess the expiration.

Problems Supplying Personal Information

Customers who have trouble supplying personal information on phone orders may not be the cardholder at all. A real customer shouldn't find it difficult to provide personal details, like the billing and shipping address.

Typos, Spelling Errors, or Using All-Caps

Everyone makes mistakes, but too many oddities on one order may be cause for concern. It could be indicative of offshore fraudsters who do not use English as a first language.

Shipping Shenanigans

Eyebrow-raising shipping practices could be an omen of attempted fraud.

Repeated Inquiries About Shipping

Some customers repeatedly request updates about the shipping process or seem overly concerned about shipping. This could be because the individual is worried the products won't leave your warehouse before a fraud attack is detected.

No Interest in Shipping Prices

The criminal doesn’t care about the extra expense of rush shipping. Fraudsters' only goal is to get the deal done quickly; after all, it's not their money they are spending.

International Shipping

Fraudsters know that it's nearly impossible to be caught and/or prosecuted from outside the US, so double-check international orders for any other fraud red flags, and be aware of countries that are fraud origin hot spots.

In-Store Pickup

As fraudsters get wise to detection techniques, they look for ways around them. In-store pickup means the merchant can't check for red flags associated with different shipping and billing addresses.

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Tell-Tale Telephone Orders

Some fraud red flags pertain specifically to phone ordering, where the merchant representative communicates directly with the customer.

No Concern for Company Policies

Most customers are careful about big-ticket purchases, inquiring about return or exchange policies, warranties, rebates, and the like. Fraudsters typically don't care, so they're not likely to ask any questions that might give them away.

Using the Deaf-Relay System

Customers can order through a deaf relay system without using their own voice. This could be twisted for fraudulent purposes; for example, a man placing an order on a card identified with a woman’s name. Be overly cautious, requesting additional personal information to prove legitimacy.

Indifference to Specifics

Fraudsters are trying to place the order and get off the phone quickly. So, when the order-taker starts asking for specifics about the item, criminals are more likely to have a "Yeah, whatever" attitude, just to speed up the process.

Learn to Trust Your Instincts, Then Get Help

Sometimes, something about a customer or an order just doesn't feel…right. Above all, you should learn to trust your instincts; if anything smells fishy during a transaction, don't be afraid to request additional information or call to verify the purchase. A little extra due diligence may slow down the process, but a true customer will appreciate the extra protection.

At the same time, none of the things above are absolute indicators of fraud, nor are they the only fraud red flags.

eCommerce technologies are constantly evolving, and criminals are always on the lookout for newer and sneakier ways to commit fraud. Carefully inspecting each transaction for signs of fraud can help reduce chargebacks, but won't eliminate them: a determined criminal can usually find a work-around.

Learning to identify fraud red flags is just the first step towards preventing chargebacks. For maximum protection, fraud detection must be incorporated into a comprehensive, end-to-end chargeback prevention strategy.

It might be time to seek professional help. Let Chargebacks911® help you put a stop to chargebacks from credit card fraud and other sources. Contact us today for a no-obligation ROI analysis.


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