The Green Sheet Online Edition
May 25, 2009 • Issue 09:05:02
Flag and filter online payments
An online fraud detection service from Authorize.Net, a subsidiary of e-commerce payment management company CyberSource Corp., aims to help online merchants reduce both the acceptance of fraudulent payments and rejection of legitimate ones.
The service, Advanced Fraud Detection Suite (AFDS), is hosted software that employs 12 fraud-detecting "filters" - criteria used to scan online purchasing information for discrepancies and other dubious input. It is an updated version of the company's Fraud Detection Suite launched in 2005.
"It's almost an arms race against fraudsters out there," said David Schwartz, Senior Director of Marketing for CyberSource. "This is really version 2.0."
Among the detector's new offerings is a filter that compares the purchaser's shipping address against the one on file with the credit card issuer, a filter that compares the shipping address with the Internet Protocol address of the purchaser's computer, and one that allows merchants to flag orders coming from specific regions or countries.
"For example, a lot of fraudulent transactions are coming out of Nigeria, so [a merchant] could go, 'I don't want to ship any orders to the African continent,'" Schwartz said. "Or you could drill down and say, I'm willing to ship anywhere in Africa except Nigeria."
The company also offers its Daily Velocity filter for free, which alerts a retailer if its transaction volume is abnormally high in a given time period. (It is available even to merchants not subscribed to the Detection Suite.)
The feature, like others within AFDS, is customized to each merchant - based, in this case, on a merchant's typical transaction volume.
"If a merchant knows, for example, that he's getting 20 transactions a day, if he all of a sudden gets 50 transactions, that's yellow-flagged that somebody may be testing stolen credit card numbers," Schwartz said.
"It's one of the most common frauds merchants are impacted by, which is just testing stolen credit cards on a payment program," he added.
However, the merchant - not the fraud detection software - makes the final decision about each transaction, Schwartz said.
Suspicious transactions are not rejected by the software but "flagged for review" - meaning the merchant is notified and can choose to do his or her own detective work.
Schwartz said that usually involves a quick phone call to the purchaser.
"We've added these additional tools so they can flag the transaction and manually review it, so that hopefully they're catching any fraudulent transactions, but also, if it's legitimate, they're not giving up that business," he said.
"We have several filters that look at orders that are billed to one address and shipped to another address, and there may be very legitimate reasons for that," he added. "Somebody may be shipping an order to their office or shipping a gift to somebody.
But the merchant could be particularly concerned if the order is placed in the United States but shipped overseas."
Schwartz said the ultimate goal of Authorize.Net is to eliminate merchants having to manually review their orders. He noted that e-commerce merchants of all sizes are subscribers, but small merchants are the company's "sweet spot."
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