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.
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