Card fraud — fraud involving debit and credit cards—plagues individuals as well as small businesses the world over. India ranks third on a list of countries whose citizens are most likely to experience card fraud. This is not surprising since financial transactions in India’s financial and commercial sectors have grown increasingly cashless.
Reserve Bank data from 2013 showed that at least 620 million Point of Sale (PoS) purchases were made using debit and credit cards (327.5 million and 320 million respectively.) For the tech-savvy criminal, this has opened up a whole new avenue for fraud.
PoS fraud can occur online and offline (in a brick and mortar setting). In the latter context, chances are that the merchant’s card swipe machine, also referred to as an EDC (electronic data collection machine) has been compromised by someone within the organization.
Card fraud and its fallout When consumers are affected by fraud, so are the companies they do business with. Say a purchase was made using stolen customer card data. The victim would have to register a complaint with the bank that issued the card, as well as the local police.
Then, if an investigation revealed that the cardholder was indeed defrauded, the purchase would either be reversed. However, this would depend solely on the availability of satisfactory evidence or if the issuing bank had a liability policy.
For example, Zero Liability policies that prevent customers from being held liable when they report a fraud or a fraud insurance policy, where cardholder-liability is waived up to a certain ceiling if they report fraud within a specified period of time.
So, even if the seller wasn’t affected financially in the short term, she could face issues in the long run. The seller would run the risk of losing this customer, because they would now associate the incident with that particular merchant or seller, and decide to stop doing business with them.
How to detect fraud
There are certain tell-tale signs that can help you identify card fraud, and they’re not all that high-tech. In fact, you can find helpful clues in the customer order details itself. These tip-offs work best with online orders.
- You’ve received an unusually large order, but are unable to trace the customer
- Details such as the customer’s phone number are missing from the order form
- Orders to be shipped to addresses that are different from the billing address
- A mismatch between the billing address and the address that the card company has in its files
How to address suspicious orders
- When in doubt, verify the cardholder’s details. Call them and get their full address and pin code, phone number, and email address
- Compare these details with what the merchant bank has on file
- Consider using Address Verification Services (AVS) like IndiaVerify. Some banks include AVS in their card authorization package
- SMS and/or email order verification details. If for any reason, it wasn’t the customer who placed the demand, it would be good to establish it before you shipped the item
More and more customers are going to turn to cashless transactions. Your business could lose potential customers if you don’t offer electronic payments as an option. Don’t let the fear of fraud—or ignorance of it—affect your decision to use an EDM. If you follow the correct protocols, you can protect your business from card fraud.