Here we will discuss credit card frauds and how they can be prevented using address validation.

Cards: The Extended Payment Transfer Method

The payment methods have been modified greatly throughout history. From barter systems to gold coins to paper-based cash to cards, the payment methods have traveled a thousand miles. Now the card payments are overcoming other methods because of multiple reasons. Cards are easy to carry, use and take less space than cash. Be it e-commerce businesses or point of sale terminals, cards are now accepted everywhere. The increase in usability and ease of transfer of funds attracts scammers to disrupt the card payment transfers.

Credit/debit cards contain a collection of a user’s personal and financial information. Details like cardholders’ names, remaining balances, and account numbers are present inside the card. This data is stored inside (NFC) chip which transfers the payment after confirming the PIN. Criminals try to steal this information through social engineering tactics (hacking) and the most used method is phishing. 

Card Not Present Fraud: A Rising Payment Crime

Australian Payment Network reported that CNP fraud increased from USD 1.02 million in 2016-17 to USD 1.8 million in 2017-18. Among all other types of credit card frauds, CNP is the most popular one. It is done while the payment is transferred through an online channel or telephonic call. The fraudster uses the stolen card number for payment transfer. For example, when a customer buys products from an online business, he has to enter the card while checkout. He enters the stolen card number on the website. The ownership of the card can’t be confirmed in this way. The same is the scenario with the purchases over a telephone call.

While in a physical shop, the customer has to give the card to the shopkeeper. He can look at the card and ratify its originality. He may also demand ID proof against that card owner’s name. Thus, CNP fraud is nearly impossible or very difficult in a brick-and-mortar business.

There can also be thought that a scammer might use a fake credit card. Faking a card is very tough because of its compositions and structure. The chip, hologram, and rainbow marks can’t be copied easily. It needs special and expensive equipment which a fraudster can’t afford.

Address Validation To the Rescue

The most feasible method to prevent CNP fraud is address verification. As an address is associated with the credit card. The address can be confirmed through a person’s documents. If both the addresses match that purchase should be allowed. But a fraudster can also use fake documents as address proof. There comes online address verification to solve this problem. It can scan the documents and capture address data from them.

Here is the process of address validation for an online business.

  • The customer enters his address data while giving his details (full name, gender, and date of birth)
  • The image of identity proof such as an ID card is required, the customer has to upload one
  • A secondary document containing the recent most address is given to the address validation software in the form of a photo
  • It is checked that the name on both documents is the same
  • Lastly, the address data is extracted from the secondary document

This is the accurate address of the customer, it can be used for verifying the ownership of the card. The verified name and address can be cross-checked with the name and address of the credit card.

The CVV number can also be used as an additional security layer. The CVV verification method is widely used by online businesses. But only verifying the CVV number is not enough. A stolen or lost credit card doesn’t have any security measure against a CVV number.

In a Nutshell

The address validation software does not only verify the address but identity also. The ID card verification eliminates the risks of the usage of fake ID documents. In 2016, chargebacks cost USD 6.7 billion to the e-commerce industry. Fake chargeback claims can also be mitigated using address verification services.

Author's Bio: 

Billy Harris has been working in digital marketing industry since 2010. He has a Bachelor degree in Computer Science and currently working as a web developer.