Minimizing Fraud
U.S. exporters can reduce their exposure to credit card fraud in a number of ways, but keep in mind that each method has limitations:
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Use Common Sense:āÆIf something seems wrongāfor example, if a buyerās billing and shipping addresses donāt match (especially if the addresses are in different countries)ā then scrutinize the order, and donāt process it until youāre sure the credit card beingāÆused is legitimate.
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Address-Verification System (AVS):āÆAsk your bank how you can ensure that a buyerās credit card is valid. An AVSāavailable from your credit card processing company and used to verify the identity of the person claiming to own a credit cardācan determine whether the address on a buyerās credit card account matches the address the buyer typed into your online order form. An AVS can check information for card holders in Canada and the United Kingdom, but not āÆelsewhere.
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Card Verification Number (CVN):āÆAt the time of purchase, many sellers require the customer to enter not only the credit card number but also a three- or four-digit security code (usually found on the back of the card). In theory, that number is available only to the card holder, so requiring it helps reduce the incidence of fraud. However, as more sellers require buyers to provide CVNs, savvy crooks likely will find ways to capture them, thus reducing the CVNsā effectiveness as a fraud-prevention⯠tool.
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IP Geolocation:āÆThis service is available from various companies and enables a seller to identify a prospective buyerās geographic location (country, region, ZIP/postal code) based on the IP address of the computer being used. If the country or regionāÆāÆof the buyerās credit card address doesnāt match that of the IP address, the seller canāÆflag the order and then investigate further or reject the order outright. This method is increasing in popularity, particularly among larger exporters.
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Background Checks:āÆU.S. exportersāespecially those involved in business to business (B2B) sales totaling thousands, and possibly millions, of dollars to a foreign agent or distributorāshould conduct background checks on prospective buyers, even if that means taking the payment process offline or placing it on hold. Background checksāÆmay include purchasing a credit report on the prospective buyer, calling up references, or other practices. Conducting online due diligence in certain countries can be difficult; information about the company might be published in a language you canāt translate,āÆor the practice of posting reviews of buyers and sellers online might not have caughtāÆon. Several firms can provide financial information about foreign companies, and the U.S. Commercial ServiceāsāÆInternational Company Profile can help. Background checks can be costly and time-consuming, so they should be used only for higher value orders.
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Country Exclusions:āÆIf your company is small and youāre just testing the export waters, you might not want to ship to countries where the risk of fraud is high. Just be sure that your site lists those countries; that way, prospective customers wonāt waste time building an order that canāt be filled.
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Additional Resources:āÆThe best resources you have for combating fraud are your bank and the credit card companies themselves. These groups spend millions of dollars to combat credit card fraud, and then they share that information with you in an effort to reduce fraud.
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Use a Third-Party Payment Product That Assumes Risk:āÆYou can shift fraud risk to a third party, such as PayPal and Alipay. The third party will take on the responsibility of vetting the buyers and their creditworthiness. Similar to providers of commercial bank cards, the payment product company will charge a transaction fee and a fee for converting a foreign currency into dollars.