9 Credit Card Fraud Detection Techniques


Due to advanced technology and wide use of online purchases and the use of ATM machines, your credit card information could be at risk of theft.

What is credit card fraud?

Credit card fraud can occur when your card is lost or stolen and used to purchase goods or services. Also, a criminal could get hold of your card number and expiry date and use this information to buy goods by phone or over the Internet. Or the criminals could tamper with payment terminals at retailers to get your card information and make a counterfeit credit card. But, you can avoid credit card fraud by keeping your credit card information safe.

Also, you need to look out for criminals who try to collect your credit card information and account details. Besides, for a business, you can verify customers with a few credit card fraud detection techniques. You can explore things like suspicious behaviour of shoppers, nervousness, agitation, indiscriminate purchases without regard to the price of goods.

You could also check the card to confirm any irregularity in the hologram, embossment and miss-aligned characters and so on. Let us start the guide and list the credit card fraud detection techniques immediately.

Credit card fraud detection methods

Above, we discussed how an individual and a merchant can detect credit card fraud. However, at this point, we will focus fully on how merchants can detect credit card fraud because most of the cards will come to them. we will also show you how individuals can protect themselves against credit card fraud.

Let us begin immediately.

1. Screen for suspicious activity

Look out for these signs when shoppers are buying from you. For example, be cautious when a  new customer walks in and buys a large purchase with any former history. Or if they submit many repeat orders in quick succession.

Also, watch out for address mismatches. A fraudster will in most cases not know the correct billing and shipping information of stolen card holder’s data.

2. Locate your buyer

You can try to find your buyer.

Don’t rely only on the information the buyer gives to you. There are tools you can use to find where your customer is located. For example, you can use geolocation to locate buyers and verify this against their billing information.

Also, IP address verification can show if your buyer made many transactions from the same location using different information. However, you can’t confirm whether a buyer is a criminal, from a location. The cardholder may have a valid reason, like placing an order while travelling.

Just use this as a part of credit card fraud detection techniques with others in this post.

3. Adhere to best practices

Make sure you are not rigid with your customers. If you just want to make a profit without caring for their own side of the matter, your customers might file a charge-back to recover their funds. So know when to bend the rules when not to.

For example, if a customer fails to return merchandise by one day or two let go to keep buyers happy and ensure loyalty. But when it is fraud-related use the law to protect yourself against loss. If a business deal looks fraudulent, don’t accept it.

4. Use multiple fraud tools

There are many credit card fraud detection tools you can use in different kinds of fraudulent threats. Make sure you use many for different scenarios.

You can deploy different detection tools that will form part of a coordinated, multi-layer strategy. Some of these tools include CVV verification, AVS, fraud scoring, geolocation and velocity limit and so on to help you separate fraud from genuine transactions.

5. Remember fulfilment

After checkout, make sure you fulfil your own part of the transaction fast. Order fulfilment is vital as any other credit card fraud detection technique in this post. Making order fulfilment fast, exact and reliable post-transaction will improve customer satisfaction.

Also when you examine order details closely, you may spot fraudulent activity. Besides, order tracking and confirmation of delivery are part of the fraud detection tool. And when the need arises in the event of a dispute, they can form valuable compelling evidence.

6. Employee awareness

For the credit card fraud detection strategies to work, you need employees who are aware of the threat they face daily. Since your workers are the ones reviewing and fulfilling orders and interacting with customers every day, they are an important line of defence against fraud. So keep them updated on the new developments and best practices about fraud detection.

Also, train your staff to identify and gauge threats during the order-processing and fulfilment stages. And keep them alert about this threat by regular information instead of only during on-boarding.

7. Maintain PCI compliance

Make sure you maintain the PCI security standards, a universally-applicable set of rules for handling, transferring, and storing sensitive data. Although compliance will not stop fraud directly, it will help when combined with other credit card fraud detection techniques.

We know that PCI-compliant merchants may still be vulnerable to attack by hackers. But compliance ensures that you help to stop incidents of cardholders data, falling into the wrong hands and this also protects your reputation as a reliable merchant.

8. Review past fraud data

The truth is that you may not completely eliminate fraud. Diligent merchants suffer from successful fraudulent attacks despite their fortified walls. So when a criminal gets through your wall of defence learn from it. Make sure you critically examine the successful and attempted fraud transactions. Select key indicators that were ignored or hidden, and use that lesson to improve your Fraud detection and prevention strategy.

9. Engage in chargeback mitigation

As you can see, most credit card fraud detection techniques in this list do not involve engagement during the transaction process. A few are pre-transactional, like compliance and employee training.

But chargeback mitigation is both pre-and post-transactional. Therefore you must recognize what triggers potential chargeback based on fraud and merchant error risk factors. So make sure you are tactical during a chargeback request to mitigate friendly fraud.

How to protect yourself from credit card fraud

The banking industry works hard with the police to detect and stop credit card fraud using advanced technology and supporting police investigations.

As we have discussed above, you can protect yourself from credit card fraud by following the steps below.

  1. Go and make a report to the issuer if you  lose your credit card or it is stolen
  2. If you have a chip card, slot it in first. If the store terminal is not chip-capable, it will prompt you. Also, take your card when the transaction is done.
  3. On no account should you lend your card or disclose your PIN to anyone else
  4. And make sure you select a PIN that could not be easily detected if your card is lost or stolen. So, don’t use your birth date or address.
  5. Regularly check your transactions online or on your monthly statement to confirm all your transactions. And if there are any charges that you didn’t make, report them to your card issuer immediately.
  6. Finally, prepare a list of all your cards and their numbers and keep them in a secure place. This is vital information if you need to report a lost or stolen card.
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