|Telephone Verification Against Chargebacks: whether to proceed?|
...looking for better fraud prevention system
Hallo to everyone,
I'm a novice here and also a novice at e-commerce.
I've purchased a domain and going to run my own business through internet.
As it means acceptance of credit cards I've got plenty of questions, but one of them borrows me much more than others - a question of my chargeback levels.
I suppose I've studied all possible methods of combating online fraud (CVV code checking, AVS, geolocation etc.) and the method of telephone verification (voip) seems to be the most reliable and cheap.
I've found a couple of companies providing it.
Have you tried telephone verification and what do you think about it?
I'd be grateful for any comment, because it's very important for me.
We have one client who is somewhat high risk and he has turned everything around and started calling the clients. If he does not get a response from them or the number is disconnected, he does not charge the card and he cancels the ad.
This has helped tremendously and has also increased his business because his customers are very surprised that the owner of the site is calling them to verify the transactions
We highly recomment MaxMind for telephone verification of credit cards. There are no subscriptions, you just buy credits (about 20 cents each). When someone attempts a credit card purchase, they must enter their telephone number ( a traceable one ), to get to the next screen. Once they do, their phone rings with a 4 digit code that must be entered before the card is processed. Our fraud numbers went to virtaully zero after we implemented it. After all, the fraudster must leave his phone number registered to him to get through. It is pretty hard to beat.
[edited by: lorax at 9:14 pm (utc) on Feb. 18, 2006]
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Unfortunately, these solutions only address true credit card fraud which is relatively rare. I have found that most chargebacks are initiated by customers who have not had their card stolen or number comprimised. The reasons can range from dissatisfaction with an item, shipping damage etc. etc. Many people do not follow instructions and simply do chargebacks if anything goes wrong. There is not much you can do, but it helps to do things by the book anyway from the beginning to defend yourself.
That has been our experience also. Very few - if any - chargebacks come from fraud. Some from just plain stupid customers, some from someone in the family ordering something and not telling anyone else, and a variety of other (often unplausible) reasons.
Some ARE fraud in a sense - the customer has this idea that they can just dispute any charges and not have to pay for it, but that eventually usually backfires.
We get very few chargebacks, and we almost always pursue them to the end, and we end up getting about 60% back, and another 20% or so "partials" (that is shipping costs etc).
I order a lot online, so I've gotten some of these "telephone validation" calls from merchants.
I noticed that the ones who made "validation" calls usually also then screwed up my order--they shipped to the billing address, or they couldn't get the credit card processed (and when I telephoned my card issuer I was told the wrong code had been sent), or they took several days to ship, or they shipped by the post office when I had specified only UPS/Fedex, and so on.
Eventually I realized that the "validation call" merchants were the ones that were likely to be amateurish, undercapitalized, overworked, trying to get by without a proper merchant account, didn't have a UPS account, etc.--in short, apt to cause me problems.
Now, when I get such a "validation" call, I just tell the merchant to cancel my order immediately. There's nothing I can't order from someone else in about five minutes.
We do phone verifications on larger and suspicious orders. The ones we'd put the highest likelihood as being outright fraud often turn out to be unreachable at the billing phone number or outright refuse to give out the correct number or even update it with the issuing bank (imagine that).
Since we began this policy, we've had a surprising number where the cardholder hadn't known about the purchase. Those usually turn out to have been relative/friend/roommate who decided to "borrow" the card. It's not all that unusual for us to be told that the person had absolutely NO permission to use that card, ever (card stolen by supposed friend or ex). However, most of the others would have probably done a chargeback because they wouldn't have recognized the charge and could have legitimately said they hadn't placed the order. We feel the effort is worth it because even mistaken chargebacks really add up in time and money.
Thanks for your interest.
As I can see there are plenty of opinions over the usability of telephone verification.
I've compared all pros and cons and decided to include this service into my payment routine.
Now I face the problem of provider's choice.
Network_Pay recommends Maxmind. But as I've discovered, they specialize in IP geolocation and telephone authorization is just an additional service.
I've also found Fraudgate (their web site seems to be neglected, so I doubt in company's reliability) and Varilogix. But the last one is too expensive... There's also Proveout - a company with attractive price but probably a new player on the market.
Can your give a piece of advice - what company to choose? Have you ever cooperated with one of them?
Thanks once more.
Actually with MaxMind, you can just buy the credits for the phone verification (4 digit code) and that is it. There site is a little hard to navigate as they have so much going on. You do not have to do any of their monthly options if you do not need them. We also do the IP geolocation that allows us to see the ISP/location where they are calling from to make sure it matches with the address they gave. It is hard to beat and cheap.
But like others have said, this only covers true fraudsters, not the regular customers who change their mind. Your product and service is the only remedy for those.
Navigating Maxmind is rather challenging... ;)
I continue to doubt. Maxmind's verification costs 0.20$ per call for a US situated client and 0.38$ per call for a customer from UK. For comparison, Proveout's verification costs 0.15$ for both US and UK. Varilogix prices an approved call at 1,25$ (!).
Of course the company's prestige makes sense. But if the service is the same - why should I pay more?
There's an interesting thing I've found about this new company. They declare that they provide an opportunity "to record customer's voice in order to prove that he/she has actually made a purchase and won't decline it as it sometimes happen". It probably targets dishonest customers who potentially can change their mind and decline the purchase.
Do you know if anyone else provides such service?
Thanks for your time.