gaouzts - 8:05 pm on Dec 11, 2002 (gmt 0)

slindo--

To follow on, my only comment would be that the fraud issue is multi-faceted, with numerous holes in the current processing schemes that banks and processors use. I'm certainly not an expert on all of the issues, but I have a lot of battle scars from dealing with the issues and have had to supplement the existing fraud prevention processes used in the industry with homegrown ones.

By the time a customer reports a credit card as being stolen, there have usually been many charges run up and the merchant has to eat those. I believe I read somewhere that the life of a stolen credit card is only three days. We started using a processor that had the foresight to work with other merchants to capture their own data base of stolen card numbers. This data base is always checked first before the charge is submitted to the bank. The problem is even more acute for digital goods purchases where you don't have the benefit of having a tracking number for the goods you ship out.

Also, we have discovered regions in the world where we will refuse to accept cards due to our own history of fraudulent charges. Last year, we have over $20,000 in fraudulent charges come through in a two day period from the Philippines. We were able to block the IP address and ISP to prevent further abuses. This group however was smart and simply moved to other ISPs in the area to continue their scam. It was a cat and mouse game for two weeks until finally, they gave up because we would always catch them. Thank goodness they didn't jump to another provider in the US like AOL, although, we would have more legal recourse there.

Bottomline is that if you can find a processor or service that employs some of the additional safeguards you are better off than trying to address the fraud issue on your own.

Regarding the comment to the fees being out of line, these are standard fees that Wells Fargo charges and other services. They seem to be in-line with other banks we've looked at. Most people don't really know what the end-to-end cost of a credit card transaction is. Our CFO has spent a lot of time analyzing these numbers so I think we have a good handle on it. Was just trying to pass on some of our findings.