Starting up an online business involves a lot of work and commitment for the merchant; confidence in the product, building and developing the web site, advertising and promotion are just a few of the activities that will make the business grow and succeed. 

Therefore, when a merchant sees his profits being eaten up by fraudsters and chargeback penalties, it is understandable he wants to do everything in his power to put a stop to credit card fraud. Although accepting credit card orders on a website allows merchants to automate online sales and reduce costs, the real target is to control the menace of fraudulent online credit card transactions.

More often than not, the credit card holder doesn’t lose out if their card is used in a fraudulent transaction; the credit cards issuing bank covers the loss and reimburses the customer since they are keen to keep their custom and encourage more spending on the credit card as it generates big profits for them. 

The customer is often liable for the first $50 of a fraudulent transaction but issuing banks will often return all monies as a show of good will. The merchant takes most of the costs of fraud in the loss of the product or service, chargeback penalties and transaction fees, never mind the time spent in checking transactions, chasing up payments and reporting the crime.

Credit card fraud runs into billions of dollars each year and increases as internet usage grows and more new businesses venture online. In recent years credit card companies have had to look seriously at the issue of credit card fraud and deploy methods that will curtail fraudulent transactions. All merchants at some point will experience online fraud, reporting it to the police will do little as there just aren’t the resources or time to solve these types of crimes and usually investigation costs far exceed the actual amount stolen, especially if it is an international crime.

Choosing the right payment gateway provider suitable for the type of business is crucial, if the business is new it might be more practical financially to make a contract with a third party provider, as they deal with most of the transactions, but as business increases the transaction fees for each sale can start to add up.

One of the most important features for a website is the anti-fraud system; make certain it is suitable for your type of business. No business is the same, the product and type of customer attracted to the website will be different in every case and the anti-fraud tools should reflect this. 

Merchants will experience varying levels of crime depending on the type of product on sale, geographical location and the merchants own knowledge of fraud.

The larger credit cards such as Visa and MasterCard have a programme whereby they monitor the amount of chargebacks produced by each merchant, if merchants exceed their given limit then they have to pay penalties. Banks impose penalties to encourage merchants to be more diligent when checking credit card transactions. If a merchant does experience many chargebacks, then the banks will discuss the situation with them and offer advice and security tips on techniques to reduce the number. 

These can include making a record of the e-mail address, card number and phone number of those who have caused the chargebacks; observing how regularly an individual card is used; limiting the amount one card can charge without authentication and supplying a merchant with a customer service telephone number to call if there is a query. 

The credit card providers research into the areas where security is the weakest and use this information to get merchants to take extra precautions at these points. 

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