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High-Risk Credit Card Processing and Fraud Prevention

BluePay is pleased to bring you this valuable information from our partner, Due, makers of a free digital wallet that allows users to easily make and accept payments online.

Not all businesses were created equal when it comes to the risk they incur from the industries they serve. Many credit card processing companies will not work with these high-risk industries due to this very risk that fraudulent activity will be higher because they are not operating within traditional products or services. However, like businesses in traditional industries, there can be strategies implemented that help reduce the risk of fraud and even prevent it from being an issue. 

Identifying High-Risk Businesses

There is a wide range of business segments that are considered high risk, including any business that operates offshore, those that are selling items considered close to illegal, and companies that may employ questionable marketing and sales tactics. Others tend to be high risk because of the countries the merchant sells to, the average dollar amount for monthly sales is very high, or there tend to be a considerably higher number of card-no-present transactions.

Businesses that fit into these general high-risk categories include anything related to pornography, auctions, online gaming and gambling, coupon or rewards-points programs, discount health and online pharmacies, e-cigarettes and drug paraphernalia, event ticket sales, international merchants, magazine sales, multi-level marketing, prepaid debit cards, counterfeit goods, third-party processing, time shares, weapons, vitamin supplements and many types of travel services just to name a few.

Understanding the Environment for Greater Risk

While every business comes with some risk just because it’s difficult to predict the external and internal environment that will impact that company, the aforementioned industries tend to be known to have fraud and higher chargebacks than others by the very nature of what they are selling. This is especially the case in the industries that employ questionable marketing and sales tactics.

Additionally, there is risk in selling to other countries and in other currencies related to potential involvement in criminal activity, money laundering, terrorist funding and more. The regulatory environment in these other countries also tends to be far less restrictive, increasing the potential of participating in risky credit card transactions. 

Working with a High-Risk Credit Card Processing Company to Prevent Fraud

Many businesses in these high-risk categories often struggle to find a credit card processing company and, when they do, face numerous fees and restrictions due to that risk. However, there are high-risk credit card processing companies that you can work with on preventing fraud and lowering that risk so you can take advantage of the potential for global expansion and unlimited earning potential.

The best approach is to focus on preventing chargebacks, which is often the only thing that makes you a high-risk candidate for credit card processors. You can work on minimizing these through a chargeback management program that you can establish within your business. This includes using available tools and technology that helps you assess each customer during the transaction process to understand how their behavior might signal a potential chargeback.

There are other steps you can take to lower the vulnerability to fraud:

  • Be alert to failed transactions. Many fraudsters buy stolen credit card number information to then use for online purchases, but they are not necessarily good about how they enter information on the online order form. They may only have some information about the cardholder and use software to try to guess the CVV code or the billing zip code. While some payment gateways are not configured properly, allowing them to get this information correct, there are many credit card processors that help you make sure you have everything set up properly to stop this activity. You can also set up your payment gateway to limit the number of failed transactions that are processed before that card number is completely blocked, shutting down their efforts to commit fraud. While typos may happen with a legitimate customer, so it is okay to let them try a few times, the ability to limit the attempts definitely can shut down fraudsters.
  • Track for non-AVS match transactions. Fraudulent activity can be reduced by adding an address match system that goes through every transaction. Any non-AVS match transactions can be flagged for review or even blocked. This is a good way to also stop those criminals that may have received stolen credit card numbers but not any other data related to the person who had that card. This is another feature that your credit card processing partner can add to your payment gateway.
  • Use IP tracking and proxy lookup software. Another feature that can be added to your payment gateway is the ability to track and restrict certain IPs, especially those from certain countries if you don’t want to work with those due to the risk. While this works for certain fraudsters, there are those who are much more sophisticated with their activity. They use proxies that make it look as though they are making a purchase from a computer that is located in one of the approved countries on your list. That’s when you need to also add fraud prevention software that identifies any proxies among the listed IP addresses.
  • Investigate large transaction sizes. When purchase amounts become large, it’s important to spend more time doing due diligence to determine their legitimacy. Typically, fraudsters want to get as much as they can for the fraud they are committing because they know there is a limited time before the credit card number gets flagged as stolen. Again, your credit card processing company can assist by helping you set up your payment gateway to catch these large transactions. You can decide on criteria like it’s a certain dollar amount or percentage over the average ticket. While the payment gateway is there to help you automatically catch these because you cannot watch every transaction, when they are flagged it is important to take the time to manually review these transactions and assess them for anything else that may arouse suspicion. Here is where you can contact the customer and verify that they did make the transaction.

Of course, other security measures that are available regardless of whether they are for high-risk transactions or low-risk transactions can also be used. This includes end-to-end encryption, tokenization, PCI compliance, 3D Secure and the migration to EMV/chip-enabled credit card acceptance. The more layers of security you can add, the lower your chances of chargebacks and fraudulent activity. Along with the right credit card processing partner’s expert assistance, you can enjoy the benefits of being able to serve more of these business segments that were once considered too high risk.


Topics: Partner Posts, Guest Blog Posts, PCI Compliance and Fraud Prevention, Small Business Tips, Enterprise Business Tips, Getting Started with Payments

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