ECommerce Credit Card Processing Risks

PC based credit card processing solutions are uniquely vulnerable to security breaches and other potentially costly issues. Before you set up your small business merchant accounts, it is a good idea that you understand where the risks are in accepting card payments and how you can minimize them. Your credit card merchant processor should be available to help you. The risks can broadly be divided into two groups: fraudulent transactions and processing errors or inaccuracies.

There are a number of services to help you fight credit card processing fraud. All major credit card networks and companies have implemented a three- (Visa, MasterCard and Discover) or four-digit (American Express) security code that is inscribed on the back (Visa, MasterCard and Discover) or front (American Express) of each credit or debit card. The purpose of these codes is to ensure that the cardholder is in physical possession of the card. Another credit card payment processing security tool is the Address Verification System (AVS). It is designed to verify the identity of the person attempting to make a card payment. The system checks the numeric portions of the provided billing address and compares it to the ones that the card issuing company has on file. For example, if the address that is being verified is 5900 Central St., Cambridge, MA 02143, the AVS checks 5 900 and 02143. If there is an apartment number in the address, the system may check it as well.

The most common processing errors that plague eCommerce merchant accounts are inaccurate transaction information and improper authorization. Because payments are accepted over the internet, the information has to be key entered, instead of read from the card’s magnetic strip. It is easy to understand how this process can generate significantly more inaccuracies than a manual credit card processing operation. Merchants need to double check the payment details in order to reduce potential chargebacks. Authorizations present another challenge. Transactions should not be forced through if authorizations fail and, although credit card processing companies offer them, voice authorizations should be avoided as they don’t provide a record that can be represented in a case of a chargeback.

As you see, internet credit card payment processing solutions require closer attention than their face-to-face merchant account processing counterparts. Yet, with the proper system in place, virtual transactions can be almost as secure.

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