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How to Prevent In-Person & Online Fraudulent Transactions That Can Result in Chargebacks

In our last post, we covered chargebacks, what they are, and why they happen. We provided some proactive measures you can take to prevent a customer from charging back a payment. Check out the article here if you haven’t already.

The best practices in the article, 7 Ways to Proactively Prevent Credit Card Chargebacks, could be grouped into what we call “clear communication protocol for your customers” … those are: clear product descriptions, clear refund/cancellation policies, clear receipts for every purchase, and so on. In other words: the better the communication with customers, the clearer your policies, the less chance of chargebacks.

There are, however, other ways chargebacks occur — one of them being through fraudulent use of a credit card. The good news here is that you can take steps to prevent fraudulent charges from happening.

Best Measures to Prevent Fraudulent, Card-Present Transactions

Before we go into best practices to prevent card present fraud, it should be noted that EMV technology, such as chip cards and EMV payment terminals, seek to put a stop to card-present fraud altogether.

Instead of criminals having the ability to capture information held on the magnetic stripes of a non-EMV card, the chip in an EMV chip card generates a unique one-time code that’s required in order for the transaction to be approved.

Since an EMV chip card could be lost and stolen — and at the moment many magnetic stripe cards are still in use in the U.S. — it makes sense to put some best practices in place to reduce in-person fraudulent charges. It’s highly recommended staff be trained to take these steps at the checkout counter when taking cards.

  • Train your employees to know the signs of fraud and suspicious behavior they may encounter.
  • Ask for identification when handed a credit card.
  • Get authorization for all charges with a valid signature.
  • Verify signature by comparing the signature to the back of the card.
Best Measures to Prevent Fraudulent Transactions Online

It’s obviously more difficult to prevent fraud online since the cardholder and card are not present. For online transactions, it’s advised that you employ a combination of best practices and fraud prevention tools.

One best practice that your business may follow is confirming the phone number and transaction information PRIOR TO delivering a service and shipping a product.

Online fraud prevention tools:

  • Utilize card security code verification. Known as CVVs (Card Verification Values — a 3-digit number on VISA, MasterCard and Discover and a 4-digit number on American Express), these codes help ensure that the person placing the online order has the actual card in hand.
  • Use 3D Secure. This prevention tool acts as another layer to prevent fraudulent activity. Cardholders are required to create an identification number. By employing 3D Secure in your checkout process — and therefore requiring the purchaser enter the code at checkout — you’re ensuring that the actual cardholder is making the purchase. 3D Secure is available through Constellation Payments to authenticate cardholders while making online payments.
  • Become PCI Compliant. All companies that process, store, or transit credit card information are required to comply with the Payment Card Industry Data Security Standard (PCI-DSS), which is a set of requirements created to keep payment card data secure.

At Constellation Payments, in addition to setting up your merchant account, we’ll walk you through the entire process to ensure your PCI compliance certification experience is smooth and easy. For more on the process, see the article: Quick Guide to PCI Compliance: What You Need to Know, Steps You Need to Take.

As always, we’re here to help. If you’d like more tips on how to prevent fraud and chargebacks, or have questions on how Constellation Payments can assist, please don’t hesitate to give us a call at 888.244.2160.

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