Very few of CRN's readers need to be told the latest figures from Association for Payment Clearing Services to know credit card fraud is spiralling out of control. They also realise, contrary to popular belief, that it is the merchant, not the consumer, who has the most to lose from credit card fraud.
Understandably, but naively, some traders maintain an almost evangelical belief that card issuers have a moral obligation to treat fraud in the same way for card-not-present transactions as they do for card-present.
I am not encouraging card issuers to stand aloof from the fraud problem. However, without the advent of that ever-elusive technical solution, such a strategy would give irresponsible retailers a mandate to ignore fraud and take on any and all business, no matter what the risk. Unless card issuers identify a good commercial reason for doing so, why should they assume the responsibility?
IT can certainly help. But, especially if you are a cyberspace trader, you are dealing with a virtual customer. So when the software indicates risk, the only safe option is to reject the opportunity of a sale and turn away good business.
Anyone wishing to trade successfully in a card-not-present environment, therefore, will need a more comprehensive solution which addresses their own specific needs.
'Intelligent' security is a relatively new concept which aims to shield commercial organisations from exposure to fraud. Such solutions, originally designed for the management of claims, have now been incorporated into card-not-present trading.
A solution can take many forms, including sales screening, process management and, crucially, skilled call-handling. This quickly assesses the risk in making a transaction.
But you may think there is a cost involved in talking to customers. The answer is to deal virtually with most of them, but when risk is indicated, go back to real-life contact.
These solutions have already proven to be effective in card-not-present situations. For example, Action Computer Supplies has reduced its chargeback costs by over three-quarters.
But if you are looking for a solution to eliminate fraud entirely, you could be waiting for a very long time.
Bill Jackson is managing director of VFM Services
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