When it comes to mail-order, telephone-order and online transactions, the risk of fraud increases exponentially. After all, there is no way to ask to see a cardholder’s driver’s license, and you can’t physically examine the card for evidence of tampering. This increased risk of fraud is why interchange rates for processing Card Not Present transactions are typically higher than those for brick and mortar stores.

As with card-present transactions, fighting fraud means knowing your business model and paying attention to transactions that seem out of place.

Warning Signs of Card Not Present Fraud:

Running into one of these warning signs during a transaction may be completely normal, but if you encounter more than one, it could be a sign of fraud.

First-time shopper

Unusually large orders or multiples of the same item, especially with a high resale value – thieves want to maximize their profits.

Unusual ordering schemes – beware of customers who wish to place a large order on a credit card but receive a refund via wire transfer or some other means.

Rush or overnight shipping – thieves want items delivered as soon as possible so that they can be resold, and they certainly aren't bothered by the extra shipping fees!

International addresses – Address Verification Service (AVS) cannot validate addresses outside of the U.S., Canada and the United Kingdom. Pay close attention to orders coming from or being shipped to high-risk countries, such as Indonesia and Malaysia, or those in Eastern Europe or Africa. Not all orders from/to these countries are fraudulent, of course, but they deserve a second look, especially if you do not ordinarily handle overseas orders.

Transactions with similar account numbers – these may have been generated using software.

Orders billed to multiple cards with a single shipping address – these may indicate the use of card number generation software or a batch of stolen cards.

Multiple shipping addresses or multiple cards from a single IP address in online transactions may indicate an organized fraud ring.

The use of free email services – since these have no billing relationships, they can't be traced to an accountholder.

Steps You Can Take

If you suspect that a transaction might be fraudulent, always obtain an authorization and take steps to verify that the card is legitimate.

Ask for the card expiration date and include it in the authorization request.

Use Address Verification Service (AVS) to check the cardholder’s billing address. If you include an AVS request as part of your card authorization, you will receive a result code showing whether the address given by the purchaser matches the one on file. If the address verification fails on any level, you can refuse the transaction or call the cardholder to verify a billing address.

Request a Card Verification Code – Use Visa’s Card Verification Value (CVV), MasterCard’s Card Validation Code (CVC) and the Card Identification Number (CID) programs from Discover and American Express to verify that a card-not-present cardholder has the actual credit card in hand. This is the three-digit unembossed number printed on the back of Visa, MasterCard and Discover cards and the four-digit number on the front of American Express cards.

Request additional information during the transaction, such as the name of the bank on the front of the card.

Call the cardholder and attempt to verify the information.

Confirm the order separately with a note to the cardholder's billing address.

While every Card Not Present transaction presents some risk, looking out for warning signs and following the steps above can help you protect yourself and your business from credit card fraud losses.