Credit card fraud detection

Most online merchants who accept credit card payments sooner or later have to deal with the so-called carders who steal credit card information to pay for orders in online stores. This kind of illegal activity is called credit card fraud.

Carders prefer "buying" goods that are delivered immediately, before their transaction is rejected. For this reason carders are mostly interested in getting access to digital items that are usually automatically delivered online.

Detecting credit card fraud is not very difficult. We are talking here about manual processing of credit card payments when a merchant himself verifies the validity of each transaction. Automatic fraud detection is a more complicated process that involves utilization of special software solutions that use artificial intelligence.

During verification of credit card payments attention should be paid to the following parameters of the transaction and customer contact details:

Customer email address

It is the first thing you should look at! If the address has the form superhack2000@mail.com, most probably, you are dealing with a fraudulent payment. If the customer's email address is similar to sales@somebusinessname.com, the probability of fraud is virtually zero.

Check the domain name of the email address: whether it is a free mail service domain (e.g., @yahoo.com, @hotmail.com, @gmail.com) or a commercial web site domain name  (@somecompany.com). If the email address is based on a free mail service, it would not necessarily mean that the customer is a carder, just be more careful when looking at other parameters of this transaction. If, however, the email address is based on a private domain name, take a look at the web site on that domain and try to decide whether it might potentially have something to do with the products ordered.

Compare the shipping address and the card owner postal address

If you have received an order that should be delivered to an address within the United States and the customer's email address looks like somebody@domain.us, but the credit card owner's name is Ivan Petrov from Russia, it is almost definitely a fraudulent transaction.

Customer IP address

Check the customer's IP address. You can find it in the administration section "Orders" of WebAsyst Shop-Script. There are quite a few online services that automatically retrieve detailed information about the domain owner or the company who owns the server with the specified IP address, e.g. SmartWhois on the all-nettools.com web site. You can use such services to find out where the server with your customer's IP address is located. If the country of the server is not the same as the country specified in the order shipping address, the transaction validity would be liable to suspicion.

Telephone call

Call your customer if you still have some doubts. During a conversation you can easily determine whether you are talking to a thief by the way he speaks and the contents of his replies. Ask the customer to confirm the order by telling you some information about the credit card or himself (e.g. the last four digits of its number).

Order amount

Pay closer attention to the orders whose total amount exceeds average amounts of orders that are usually placed in your online store. When spending stolen money, carders rarely limit themselves.

Search on the Internet

Search more information about your customer on the Internet, e.g. using his or her email address or full name. If you find out that the customer actively participates in discussions on hacker forums or other barely legal web resources, it should be another reason to check that customer twice before accepting the payment.

The process of credit card payments verification is never as straightforward as it might appear after you have read this article. The above recommendations are merely general guidelines that should be kept to when you manually process credit card payments.

Good skills in this area are gained very quickly once you start selling something online. Our guidelines may be amended with your own rules that will help you make the verification procedure faster and more efficient. Identifying fraudulent transactions at first sight does not require being a credit card genius – all you need is just to be careful when comparing the customer contact information and the credit card owner's details.