May 14, 2021
by David Goodale
Using Video to Spot and Stop Credit Card Fraud
(Slightly edited from video transcript for greater readability)
One of the unexpected things to come out of the Covid pandemic is the sudden wide adoption of modern video based web technologies that have made it easier to interact with people as if you are in there with the person. Specifically, technologies like Zoom and Google Meet have made video conferencing as easy as a traditional phone call. In some obvious ways it's a lot better than a phone call, with screen sharing, and making a more human connection with the folks on the other side.
This has opened up opportunities for merchants to fight fraud in a way that has never been possible before.
Pre-2020: Using telephone, wit and intuition to spot fraud
It's important to remember that with payment processing, the onus is on the merchant to decide whether to accept an order or not. In the past, when merchants wanted to screen an order they would call the customer to attempt to determine if it was legitimate or not. There are the obvious signs that confirm if an order was fraud, such as a phone number that doesn't work, or a person on the other end who insists they didn't order a $12,000 Rolex.
It wasn't a perfect science though, because more brazen fraudsters will give out working phone numbers, perhaps to prepaid cellphones or other means that can't easily be traced or tracked.
In these cases I would advise merchants to ask questions such as asking the cardholder to confirm their billing address. If they knew it off by heart, without hesitation, you could ask a few other questions to feel them out. For example, ask them the closest major intersection to where they live. This was always a fine line though, because you don't want to overly frustrate legitimate customers, and a fraudster who has their act together can handle those questions relatively easily.
2020 - 2021: the year of video conferencing. (And how to use it to fight fraud)
Most fraudsters don't have one of those face mask creating machines that Tom Cruise (I mean Ethan Hunt) uses in Mission Impossible. Other than fraudsters with advanced James Bond spy equipment, you're one zoom call away from shutting them down.
What merchants need to do is look at the billing name on the order. Then, get that customer on a zoom call. Tell them that for your security, as well as their own, that you do these security calls to ensure a valid use of their credit card. Once in the video conference, ask them to hold their photo ID up to the camera. Look at their face, and look at their ID. Does the face match the ID? Good. Does the name on the ID match the name on the credit card? Very good. That's pretty much a surefire way to validate orders.The use of video conferencing is one of the best techniques businesses can use to spot and stop credit card fraud.
It's probably one of the best techniques that business owners can use to spot fraud, but nothing is perfect and there are some challenges with it. For example, what if the person is using some else's credit card? If that's the case, you could arrange a video conference with that other person. As with all fraud fighting efforts there are elements of nuance to it. You want to stop fraudsters in their tracks while not unreasonably frustrating legitimate customers. There is always an element of finesse to fighting fraud, but by adding video technology to your fraud screening efforts for suspicious transactions, you can go a very long way towards eliminating fraud with relatively little friction for your customers.
Merchants, the buck stops with you when it comes to deciding whether to take an order or not. There are many fraud-fighting tools available such as 3DSecure which are fantastic ways at spotting and combatting fraud, in addition to a wide range of 3rd party tools. If you have a high volume of sales that you can't manually validate, or if you have a very high risk product that attracts fraud then you might want to employ some more sophisticated tools.
However, for merchants that operate mostly low risk businesses, and where they only once in a while run into suspect orders, then using video to screen transactions can be a great addition to your fraud fighting efforts. It's an almost surefire way to catch fraudsters before your product goes out the door.
In practice you'll find that most cardholders appreciate the extra effort, because it shows that you run a legitimate business and take security seriously. You can also thank them for their order, and it might even lead to some extra items tagged onto the order, or a more loyal customer in the future.
Fraudsters: Your life just got harder. I, along with legitimate merchants around the world, don't feel one little bit bad for you.
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