Card Testing Merchants, Chargebacks and False Positives

Jul 28, 2017

Card testing occurs in those cases when a fraudster uses a merchant’s website to “test” stolen credit card information to figure out whether the card is valid. Fraudsters can buy lists of credit card numbers online on the “Dark Web” without paying much money for them. The problem is that often they don’t know if the cards they’re buying are active.

Card Testing

To test these cards, fraudsters often use automated bots and scripts that can help them run many of these numbers through a merchant’s checkout page. If the card is valid, the transaction will be approved, and the fraudster can make fraudulent high value purchases elsewhere.

Nowadays, card testing has turned into an effective tactic. During the 1st quarter of 2017, credit card testing went up two-fold as compared to the 1st quarter of 2016, according to a study by Radial, a King of Prussia, Pa.-based omnichannel technology provider.

Card testing can be identified based on:

  • Small value transactions
  • Multiple credit card purchases in a short amount of time
  • Multiple credit card types
  • Failed authorization notices
  • Address Verification Service (AVS) mismatch
  • Card Verification Value (CVV) mismatch

It’s important to note that criminals target consumer electronics, gift cards, sporting goods, and jewelry. Michael Graff, risk analytics manager for Radial, says criminals will target any merchant segment that carries merchandise they think they can resell.

Chargebacks and False Positives

Card testing results in chargebacks that can not only cause merchants’ interchange fees to go up, but can also damage their brand. Graff notes that consumers who are victimized by card testing usually think the merchant doesn’t have the ability to detect and prevent fraud, which can make them take their business elsewhere.

Fraud associated with card testing can be rather costly because of financial charges and loss of goods. As a rule, chargeback disputes take 6 weeks to materialize, as a result of which e-commerce merchants are being obliged to pay a high price for fraud.

To get top merchant chargeback protection, turn to a reputable payment processor like EMB is voted the nation’s #1 high risk processor and is an award-winning business funding provider. In partnership with Verifi and Ethoca, EMB provides its merchants with unprecedented chargeback protection and prevention services. EMB is rated A+ by the BBB and A by Card Payment Options.

Merchants may end up with rejecting a significant percentage of legitimate transactions that seem suspicious at first glance. To avoid these false positives, Graff recommends merchants use fraud-detection technologies with human-risk analysts so that transactions that appear into the gray area between fraudulent and non-fraudulent transactions could be reviewed.

According to Julie Conroy, research director for Boston-based Aite Group, false positives across all merchant categories in the US made up $264 billion in 2016. When it comes to the approval rate for card-not-present transactions, it is 80% – 85%, as compared to 97% in the card-present world.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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