Many merchant stores online do believe that since they are using very secure payment gateways, credit card fraud is unlikely to ever affect them, a review on what exactly are the functions of a payment gateway will clear the realm of myth most online stores have on the safety of accepting credit cards online.
The payment gateways process a credit card forwarded by a merchant's website, after a customer has chosen the products for purchase and loaded them into a shopping cart, a bill is generated with the shipping and billing information of the customer, if the mode of payment chosen by the customer is a credit card, a payment gateway captures and encrypts the credit card information and sends it to the credit card issuing company.
The credit card processing company returns the transaction with an approval or decline notice; a single internet payment gateway is used by unlimited online stores. All credit cards forwarded to a payment gateway are subjected to an address and card code (CVV) verification, these are the two primary fraud screening functions of the payment gateways.
Since online shopping does not allow a physical verification of the Credit Card, the transactions on the internet are on Card-Not-Present basis, and for seasoned fraudsters this is more than enough to manipulate and exploit the system, the credit card numbers with complete information of the rightful owners is fraudulently acquired either by hacking or identity thefts.
This fraudulently acquired information is sufficient to beat the limited screening processes of a payment gateway, credit card fraud detection is just not enough with these measures but if credit cards were subjected to more stringent screening measures prior to forwarding them to the payment gateways, then online credit card fraud can be eliminated to a great extent.
There are companies that function in tandem with online stores, and equipped with a state-of-the-art information system these companies check the authenticity of a credit card presented by an online customer, different parameters are checked for instance the IP address of the computer the customer is logged in with, the Global Address Validation, in fact a complete rule set is followed by these service providers an alert is instantly sent to a merchant in case a fraudulent credit card is used.
The online stores through their services have been able to prevent chargeback's precisely because of the credit card fraud prevention measures these companies are able to offer, unlike the limited screening measures done by payment gateways.
credit card fraud prevention
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