Real-time background checks could cut web credit card fraud

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.

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.

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