Placing an online order with your credit card is so easy these days you don’t even have to think about it. If your a frequent online shopper, some websites even offer to save your card information so you don’t have to enter it every time you place an order. With it being so easy to place an order, have you ever thought about how companies prevent credit card fraud. What if someone gets a hold of your credit card, how will the online company know if it is the card holder placing an order? Its a question we probably don’t think about much unless we have been a victim of online credit card fraud. The point of this is not to worry anyone about their card security, but instead to share some of the processes companies go through to ensure the real card holder is placing the order. Companies go to great lengths to prove the card holder is the one placing the order because if they don’t they can end up being responsible for the charges.
One extra security measure in the online ordering process is when companies ask for your CVV2 number. This is the three or four digit number they ask you to enter after you enter your card number. This number can also be called the CID, CSC, and CVC2 number. It is the number listed on the back or your credit card to the right of the signature panel. All MasterCard, Visa, and Discover cards have this number listed there. American Express also has this number but lists in on the front of their card and the number is 4 digits. Online companies verify this number because it is one way to ensure the person placing the order has the card in hand. This is because a lot of credit card fraud takes place without the perpetrator even having the card in hand. This number is so important that companies are not allowed to store this information in their systems.
The other information that is always verified is your billing information. This includes your name, address, and phone number. This information you provide for the online order needs to be the same information your bank has on file for you. In other words, the billing address for the online order should match the billing address your bank has. The online company takes the billing address provided on the order and matches it up with what the bank has on file. There are several ways they do this and usually they only verify portions of the address. For example, they may match up the numerical street address and the zip code with what the bank has listed. Or they could match up only the zip code. This process is typically done electronically, unless it is a small company, and if the address doesn’t match up then the order is flagged and at that point they will do additional verification.
Additional verification will probably include calling the bank and trying to verify the address information with a live person. This takes place because sometimes card holders can list a secondary address with the bank and this most likely won’t be detected unless the bank verifies it verbally. A call to the bank is also made because at that point the online company can verify the phone number listed on the order with the bank. If the address or the phone number provided does not match up with what the bank has listed this further flags the order for more verification.
When a third party calls a bank to verify your credit card information the bank is limited with what account information they can verify. First, the online company or any company, has to have a merchant ID number and a dedicated toll free number they call. They have to be able to provide a valid merchant number to the bank and the bank verifies the merchant number they are providing belongs to the company they are calling from. From there the bank can only verify information and not provide information. Basically the bank can only answer yes or no questions about the account. The bank will let the online company know if the account has been closed for fraud. If that is the case the online company will restrict the card number that was used for the order so if any subsequent orders come through with the card number they can be canceled immediately.
Once all this extra verification is done, if the online company still flags the order for lack of verification then they will call the customer. They will ask the customer for the correct billing information so they can verify it with the bank. The online company will require that they provide the correct information, including phone number, or they will not allow the order to be processed because it could be fraud. A really import piece of the verification process is the phone number. This is because if the online company has the correct phone number the bank has then the chances of calling that number and getting the card holder is high.
Why do online companies go through all this trouble to verify orders? The answer is simple, money! If they don’t verify this information and the order turns out to be fraud then the online company is responsible for the charges. You might be familiar with a charge back process if you have ever found unwanted charges on your card. If so you probably disputed the charge with your bank and hopefully received credit. There is a whole process that your bank goes through to research that unwanted charge. Under normal circumstances at the end of that process your bank will credit you back. What you don’t know is that your bank might be reimbursed for the charge from the company that initially processed the payment if that company not follow certain verification criteria like the ones mentioned above.
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