Reducing Customer Fraud in Customer Not Present Transactions

October 2006

Whilst reports from APACS show that Plastic card fraud losses are on the decrease with the introduction of Chip and PIN, fraud from customer not present (CNP) transactions increased by 21% in 2005.

This figure is expected to continue to rise as fraud becomes more difficult to undertake in the face-to-face environment as a result of initiatives like Chip and PIN. Nevertheless, the rate of increase is smaller for the first time since 2003,and will improve further with an increasing number of retailers utilising initiatives such as AVS/CSC. Customer not present fraud usually involves the theft of genuine card details which are then used over the Internet, by phone or mail order. The legitimate cardholder doesn’t usually find out until they check their statements.

What can you do to reduce this?

Implement our EFT/400 AVS/CSC module. CSC (Card Security Code) and AVS (Address Verification Service) uses the3 digit code on the back of debit/credit card and numerics from the cardholders address. These are passed to the acquiring bank and are crosschecked against the details held by the bank. The result of the checks are passed back letting you know whether the house name/number has been matched, partially matched or not matched and likewise whether the postcode is matched, partially matched or not matched. You can then make the decision as to whether to accept the transaction based on this additional information.

Other benefits:

•It can also be used to crosscheck the delivery address is the cardholder ’s home address.
•The CSC is difficult for fraudsters to reproduce.
•It is also difficult to steal, because merchants are not permitted to store the CSC on their systems.

It has been suggested that the introduction of this simple check can reduce Internet fraud by up to 70%.