How does Address Verification help in Credit Card Fraud Prevention?

 

With an accession in a digital transaction, the ratio of cybercrime has also risen. In the USA only, FTA reported a 24% spike in credit card fraud during the last year. Furthermore, the report also mentioned that credit card related fraud was the most commonly reported scam leading to identity theft.

These frauds had not only caused financial loss to the customer but also affected the banks and businesses. However, online businesses are adopting various techniques to keep fraudsters away. One of the techniques that are widely adopted is address verification before boarding the customer.

If used properly address verification system can eliminate credit card frauds and chargebacks. It also reduces the chances of fraudulent transactions by making sure that the end-user is providing a valid address.

How Online Address Verification works?

Online address verification is usually performed by asking an end-user to upload a picture of an authentic document having a legitimate address on it. The required information on the uploaded document is extracted using OCR and is analyzed with the blend of AI and HI (hybrid technology). Initial security checks are performed such as checking that document is not forged or photoshopped. The details are saved in the database and every time the user makes a purchase with their credit card their information is verified against the previously saved data in the database.

Types of Credit Card Frauds

Following are the two main types of frauds i.e. friendly fraud and stolen card fraud:

• Friendly Fraud

Friendly fraud occurs when a customer files a chargeback. By claiming that they have not made the purchase from the credit card and that their card is being used by someone else. If the company performs identity and address verification, they could prove that the customer is making false claims by showing the verification evidence.

• Stolen Card

If you lose your credit card or it is stolen, the person holding the card could make transactions both online and offline. While offline businesses could easily verify by matching details on the card with the government-issued ID of the person making the purchase. But in an online transaction, it becomes difficult to verify whether the person is who they claim to be. Through identity verification, online businesses can verify that the card is not being used by someone else.

Other than this online address, verification is also beneficial in many other scenarios such as AML and KYC screening.

With an increase in illegal transactions, many countries have taken measures to perform strict KYC and AML screening. All the organizations conducting businesses within the boundaries of these countries must follow KYC and AML compliance. This includes customer due diligence before taking any customer on board. Address verification is a part of customer due diligence along with identity verification.