View Full Version : best fraud prevention payment systems?
Related to this thread (http://www.aota.net/forums/showthread.php?s=&threadid=15489), I guess the appropriate thing to do is take the next step and figure out what merchant account/gateway is regarded as best for fraud prevention and ease in working with (e.g. Kagi's system has fraud prevention settings that appear pretty good, but good luck finding and/or tweaking them).
Presumably, any of the good systems will integrate with a variety of carts, but overall flexibility in that regard is also a priority.
All personal experience comments and links to other reviews are welcome and encouraged. :)
Dan
Fraud detection systems are much like spam detection systems -- everyone's milleage will vary depending on what kind and volume of business (email) they receive.
Implement fraud detection very carefully. Make sure you have good sales metrics and test thoroughly. You have to be careful. For most businesses that I have tested, most all fraud systems will cause you to lose more in profits than the fraud was costing you.
Make sure you aren't confusing poor transaction management with the inability to detect fraud. For example, ask yourself these questions:
-- Am I personally reviewing each transaction and accepting or declining the transaction based on you own personal evaluation of whether the transaction is fraudulent? OR are you relying on your payment processor to do this for you?
If YOU are not making these decisions then you have a poor transaction management system. In fact you DO have an automated fraud detection algorithm--its the whim of your processor!
-- Do you know what KIND of fraud is taking place? Consumer credit card fraud is when someone has stolen your customer's credit card and used it at their site. Merchant credit card fraud is when your customer says "it wasn't me!" just to rip you off, or because the customer forgot what was bought, etc.
Note that the second type of "fraud" is responsible for many more chargebacks than the first type. Also, the best fraud system won't detect the second type.
The absolute best fraud detection system is: Your own personal review of each and every transaction.
Fraud detection systems are much like spam detection systems -- everyone's milleage will vary
Precisely why I was asking. ;) Getting multiple opinions should improve the odds of finding a winner. Mileage varies with every car, too, but even the best tuned Corvette will never match the gas mileage of a Civic in decent condition.
most all fraud systems will cause you to lose more in profits than the fraud was costing you.
Actually, the reverse of that is why I need to seriously investigate alternatives. I don't know if you followed along the thread I mentioned in the first post, but fraudulent activity has surpassed legitimate activity for me over the past month. Those sales metrics are tough to ignore... The challenge is figuring out where the fraud can be cracked down on. Also, I'm assuming a better payment system (than PayPal and Kagi) will decrease the rate of cancelled transactions at least somewhat, which will hopefully counter any losses due to fraud crack down (which in turn will hopefully reduce the actual fraud and related costs).
Short of seeing any actual data about these sorts of things, I can only go on gut instinct.
Am I personally reviewing each transaction and accepting or declining the transaction based on you own personal evaluation of whether the transaction is fraudulent? OR are you relying on your payment processor to do this for you?
I see three parts to that question. 1) I do review each transaction. 2) I accept the transaction if it was approved by the processor. 3) I do rely on the processor, otherwise there's not a whole lot of point in having it. I might as well just require people to pay by check and wait 2 weeks to get their software in that case... If something looks suspicious, I try to follow up on it, but I've yet to have any luck along those lines. And if you're going to second guess your processor, on what basis should that be done? No address provided, international, certain combination of products ordered? That more than anything would seem to be the way to decrease sales... I get quite a few of my purchases from international customers, so I can't exactly use that as a determining factor. Here's the list of known countries I've had purchases from:
Antartica - 5 (almost definitely fraudulent, but only 6 of the 11 have been bounced after several months)
Argentina - 2
Australia - 7
Austria
Barbados
Belgium - 3
Canada - 13
China
France - 7
Germany - 11
Indonesia
Israel
Italy - 2
Japan
Malaysia
Mexico
Netherlands - 6
Singapore
Slovenia
Spain - 2
Switzerland - 4
United Kingdom - 33
That's a pretty broad distribution, in my opinion. Most of the time, there's nothing there that would tell me to be suspicious. That's why a good processor is needed; one that has the tools built in to weed out the most likely mis-matches.
Do you know what KIND of fraud is taking place? Consumer credit card fraud is when someone has stolen your customer's credit card and used it at their site. Merchant credit card fraud is when your customer says "it wasn't me!" just to rip you off, or because the customer forgot what was bought, etc.
I've had some of each, but mostly the former. Not much that can be done about the latter other than try to reason with them. I've only had a couple of those cases, and I think in all of them I've managed to provide enough support to get the chargeback reversed, but I've also been prepared to offer a refund to at least avoid the fees.
Dan
Most of the time, there's nothing there that would tell me to be suspicious.
Are there any common characteristics that can be used to describe the large number of chargebacks you have received lately? It is extremely rare for fraud to not have a recognizable pattern.
Also, about what % of your total sales do the chargebacks represent for the past couple of months?
Are there any common characteristics that can be used to describe the large number of chargebacks you have received lately?
Not that I've been able to see. That's what was so alarming and led me to start the other thread. If there's no pattern and fraud is increasing for everyone using those payment processors, then that would answer the question. If not (or maybe regardless), I need to make changes.
Also, about what % of your total sales do the chargebacks represent for the past couple of months?
In past months maybe 10%, now 40-50%. That includes transactions not allowed by the processor. Actual chargebacks and reversals are probably 1 in 20 or 1 in 30, but with more than usual (1 in 3) this month.
Dan
Actual chargebacks and reversals are probably 1 in 20 or 1 in 30, but with more than usual (1 in 3) this month.
I should probably amend that to more accurately reflect my concern. Before yesterday, which increased the number of good transactions this month by 50%, that ratio was quite a bit worse. That's the danger of any sort of statistical analysis or trending on a low transaction volume...
Off-topic: I'm reminded of the Microsoft Server commercial where the IT guy goes around the office babbling about saving a nickel. He runs across the presumably management guy who it finally dawns on ... "we do a million (?) transactions a month..." Two thoughts immediately come to mind. 1) Who does a million transactions a month??? 2) Anyone with that sort of transaction volume is unlikely to have enough margin to have a wasted nickel on each transaction...
Dan
I've done a bit of research and found at least one good looking option.
http://www.wellsfargosecure.com/acceptcreditcards.htm
http://www.wellsfargosecure.com/internetmerchantaccount.htm
The first one is a little more expensive (pricing links are at the bottom of each page), but I like the sounds of the Wells Fargo RiskAssessor Enhanced Fraud Screen.
Our advanced fraud management solution, Wells Fargo RiskAssessorSM service, is bundled into SecureSource Suite and is an available option with Wells Fargo Global Payment GatewaySM service. Wells Fargo RiskAssessor service helps businesses grow cost-effectively without taking on unnecessary risk or turning away legitimate buyers.
Why is an advanced fraud management solution important?
Most credit card disputes result in losses that are absorbed by the merchant. When dealing with online fraud, merchants lose more than just the value of the stolen goods: they also refund the full purchase price and shipping costs to the cardholder. Online merchants are more vulnerable because fraudsters are able to make faster purchases, sometimes over multiple locations in rapid succession. Merchants with excessive chargebacks are also likely to be hit with further action by card acquirers or associations, such as being charged higher transaction fees, having funds held in reserve, or even facing termination of service. Using an effective fraud prevention and management tool can result in lower losses due to fraud.
How does the Wells Fargo RiskAssessor service help?
Wells Fargo RiskAssessor solution lowers the true cost of sales, identifying fraudulent transactions that might otherwise go undetected while acting as guard against catastrophic fraud outbreaks. Using data from the third quarter of 2002, online fraud chargebacks for the average merchant using Wells Fargo RiskAssessor service were 55% lower than those for all online merchant transactions reported by Visa USA. Wells Fargo RiskAssessor service employs advanced real-time online risk assessment and has a proven track record of detecting and preventing fraudulent activity while approving, on average, 96% of online purchasers.
Anyone have experience with that system to know if it's as good as they claim? If it is, the extra $15 or so a month would be worth it for my peace of mind.
Also, I've seen a number of references to Wells Fargo waiving the already very reasonable looking $99 setup fee in many cases (one of the cases being if you're an existing banking customer of their's, which I am).
osCommerce cart, which I've been working with and am likely to go with, isn't listed as one of their compatible carts, but I searched the osCommerce forums and it appears that should work fine. Although, the recommended Authorize.Net (which is what Wells Fargo uses) osCommerce module apparently requires Curl, which I haven't tried working with on the FQ servers. I believe it's installed, but not for external usage?
I looked at a few others that didn't appear competitive, or were the questionable types that are nearly free everything and throw in a website to boot...
I found a merchant comparison spreadsheet (http://207.99.126.29/merchant.html), but I haven't downloaded it to see if it's any good or even up to date.
Any comments on the above are welcome. :)
Dan
It looks like I'll be going with the Wells Fargo setup, barring any 11th hour changes of plan... I asked about the $99 setup fee and was told they don't waive it unless it's part of a promotion. Fortunately, they do have such a promotion currently for people also setting up a business checking account with them. That's something I hadn't planned on doing, but apparently their service requires a business checking account anyway (the rep agreed there's no particularly good reason why a business savings account wouldn't be perfectly suitable), so it's probably worth doing.
But before I jump in, does anyone know of any banks that offer free small business/low activity business checking, preferably one with lots of branches nation-wide (specifically in Oregon)? The best Wells Fargo plan for me has no minimum but a $5/mo. maintenance fee. My personal checking and business savings both have $500 minimums and no maintenance fee, but to get the fee waived on a business checking account requires a rather hefty $3k minimum balance...
I have no need for writing business checks, so I'd prefer not paying a monthly fee just to keep an account open. Is it standard practice for a merchant account to require a business checking account in conjunction?
Oh, and the Wells Fargo rep said they generally don't push the extra RiskAssessor fraud protection on low ticket item merchants (like myself), but give the fraud problems I said I've been having, he agreed it's probably worthwhile.
Dan
I see US Bank offers a free business checking option with no minimum balance:
http://www.usbank.com/small_business/products_and_services/checking/small_bus_checking.html
I'm undecided if saving the $5 per month is worth the hassle of having to go elsewhere for depositing the occasional business check, though. :\ That and not getting the $99 setup fee waived for the merchant account.
Has anyone ever had luck bartering with banks for the best deal? I know phone companies and car dealerships play that game... If Wells Fargo were to match that US Bank package, that would be ideal. Even if it meant not waiving the setup fee, it would still come out ahead (not even taking convenience into account) by year 2.
Dan
It appears I've got my answer. I got a lot more info over at the Wells Fargo branch just now. I talked to 3 people there and was put on the line with the local roaming merchant specialist. He said it should be doable to use my business savings account with some modified paperwork, but he also said something about a Business Pack which I should be eligible for and which would waive the monthly fees. He said to ask the lady in the branch for more info on that. Very murky wording to a lot of it, such as "choose 2 of the following services in 2 of the categories" -- does that mean 2 services or 4? -- or the part about the plans being for businesses with average account balances of $6k or $20k, despite neither being a monthly minimum, supposedly. Anyway, with the business savings, business checking, and merchant account, it appears I meet the package requirement to have the checking fees waived. I've got an appointment tomorrow morning to go over the account setup with all the necessary paperwork. The only bad news was that the local merchant guy said the setup fee is actually $199 instead of $99 because I don't yet have authorize.net access, which was news to me. But the second I walked in the door, the phone rang and it was the web merchant rep I had talked to earlier calling me back. I told him all of the above and he said: a) that setup will definitely work, b) the local reps don't have the same pricing available to him and that the $199 setup fee is not correct, and c) as soon as I have the Business Pack approved, he'll be able to set me up for the merchant account and waive the setup fee. Whew!
Thanks for talking me through this. :P
Dan
gymshoe
11-24-2003, 04:54 AM
hey there dank...
i just submitted my application for Wells Fargo's Secure Source Suite ... i read elsewhere this is what you've got...
though it's a little too late since i already submitted my application..
what have your thoughts been in this last month with these guys?
how has customer service been?
gymshoe
11-24-2003, 05:03 AM
also...
with Wells Fargo SecureSource Suite setup ... did you need to get an SSL cert also?
Service has been great so far. Just a little over 3 weeks. I did have a bit of a problem with my rep screwing up some billing stuff and kind of going silent on me while supposedly following up with it (I got hit with several finance charges in the process), but otherwise no complaints.
I don't think SSL is required to use the program, but it is strongly advised by everyone I know of. Not worth risking losing your merchant account over it...
Dan
gymshoe
11-24-2003, 05:08 AM
who have you gone with for the SSL cert?
Verisign is the king but also charges like one too.
thawte ...
comodo
geotrust?
i'm looking for easiest to deal with cause my site is on FQ ...
I went with the shared cert through FutureQuest. Much cheaper and a breeze to set up, and plenty good, in my opinion.
Dan
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