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.
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 emerchantbroker.com. 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.