Credit card processing company Metacharge is piloting
technology that could reduce online card fraud by allowing web
retailers to carry out real-time background checks on card
holders.
The company has worked with 192 Business Services to develop a
system capable of checking the ages and addresses of credit card
holders and whether they are alive or dead, by matching their
details against databases held by BT, financial services companies
and credit reference agencies.
The system could lead to significant savings for retailers,
which currently have to conduct checks manually or, in the case of
many smaller retailers, leave themselves exposed to risk, said
Scott Law, founder and manager of Metacharge.
The system is also attracting interest from online bookmakers
and gambling sites.
These organisations are under pressure to check the ages of
their customers, following an outcry last year when researchers
showed that children as young as 12 could gamble online.
"Many companies are floating on the stockmarket and they want to
be seen as whiter than white. Age compliance is a big issue," said
Scott. "If you have 1,000 new customers coming to your site every
month, how do you verify them?"
The Verify Your Customer system provides each customer with a
score. Retailers can chose to decline applications from low scoring
customers, or to pre-authorise their cards, giving firms seven days
to make further checks.
Metacharge is testing the system, which integrates into its J2EE
proprietary payment processing platform, with a handful of
retailers to assess the impact of the checks on the speed of web
purchases.
"The real-time nature is critical to us. Given that we are
querying up to five different databases, we want to ensure the
response is timely. At the moment it is taking an extra two
seconds," said Law.
Metacharge, which runs two Oracle-based datacentres in the UK
and the US, plans to work with 192 Business Services to expand the
service to allow background checks to be made on customers from
outside the UK.
The companies plan to build in additional checks that will allow
merchants to verify whether customers hold authentic passports and
driving licences by checking the numbers against published
algorithms.
The fraud checks could significantly reduce the risks for web
retailers, Metacharge said.
"When a new company comes onto the internet, if its systems and
processes are not up to scratch, word spreads quickly," said
Law.
The checks cost about £1.50 per customer, compared to up to £15
for a manual check against a credit reference database.
192 Business Services
192 Business Services is developing other fraud-checking
services, including a system that will automatically phone
customers and ask them to verify their age. The system will record
the answer, providing gaming sites with an audit trail if
youngsters attempt to sign-up. The company is also looking at ways
to check the authenticity of the cardholder by matching their voice
against a pre-stored sample.
Fraudguard goes cross country
Metacharge's Verify Your Customer system builds on an anti-fraud
database introduced two years ago, which the company said has
dramatically reduced fraud.
The system, known as Fraudguard, uses an IP database to check
that customers are physically located in the country they claim. It
also checks transactions against a database of known frauds.
"It highlights a lot of clumsy fraud. If the card holder claims
to be in the UK, but is in Vietnam, it will be detected" said
Metacharge founder and manager Scott Law.