Some fraud prevention products are in a ‘destined to fail’ category. I’ve already seen a few of these pop up and then go away. A couple of start-ups have approached me looking for endorsement, convinced that they have the answer to preventing credit card fraud. I try pointing out the big hole in their theory but they just don’t seem to get it.
I’m talking about the services that offer to automatically place a telephone call to a potential customer to verify that they are actually holding the credit card. You know; something like press ’1′ if you accept this charge, press ’2′ if you don’t. Some of them ask for the ‘customer’ to repeat a key phrase – or maybe just the fact that someone answers will be enough.
Those that haven’t failed yet, will – for two reasons.
First, they offer very little protection from fraud. Unless the telephone number called is the BANK VERIFIED phone number, it means nothing. A would-be thief has no problem using his own phone number (probably a disposable cell) and will be more than happy to give the system whatever response it wants. At Merchant911.org and in the fraud prevention course that I wrote for merchants, I discourage even regular voice calls to anything but the bank verified phone number. Anything else is useless, or worse – giving a false sense of security.
Second – the on-line merchants that are targeted by these companies’ marketing efforts are small merchants that simply are not willing, or able, to spend more money on fraud prevention services. The high volume merchants are well aware of the fallacy of the service.
I have, and will continue to, stick my neck out and actively denounce these services for what they are.
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- Friendly Fraud Isn’t!
- Credit Card Data Breach at Heartland Payment Systems
- Credit Card Fraud as a Business
- New Visa credit card processing fees
