Get What’s Coming to You

Employ both solutions and the advantage is a reduction in fraud chargebacks and disputes — both of which directly affect your bottom line.

The liability is shifting. Last year, VbV merchants received protection against fraud chargeback reason codes, regardless of the issuer or cardholder’s participation. Interchange rates now are five basis points lower for e-commerce preferred (VbV) consumer transactions.

In addition, MasterCard offers protection from fraud chargeback codes to merchants using Secure-Code -— if the issuer and cardholder have enrolled in the program, and the cardholder is fully authenticated. Lower interchange rates are available to qualifying international (not domestic) MasterCard transactions.

Other authentication methods include:
- score-based (i.e., pattern detection, consortium-based);
- rules-based (i.e., “if, then” statements);
- identity verification (i.e., data element matching);
- third-party databases and negative files; and
- IP validation (i.e., geo-location to determine the IP origin).

A robust risk management solution combines many of the above methods.

Solutions Available

As a cataloger, you can never be completely sure the customer is who he/she says. That’s why for some catalogers, it makes sense to use a third-party provider of risk-management solutions. There are many to choose from, including Retail Decisions, CyberSource, ClearCommerce, Experian and VerifyME. Some of them are costly, and some may seem intrusive to the cardholder. However, they also can offer you added technical support. Work with your processor to decide if this is a good fit for your business.

When shopping for a management solution, consider the depth and breadth of the database(s); frequency of updates; who contributes the data; whether the solution provides you with a user-friendly response; and whether it offers reason codes for declined transactions.

Prevent Internal Fraud

As in the brick and mortar retail space, internal theft, initiated by the very people who are on your payroll, remains the most common method of fraud. Dishonest employees can take full advantage of fake returns, so avail yourself of internal control methods such as the following: