By Paul Lang, Editor, Sell It!
August 9th, 2000
| Product: | iV-Caller Verification Service |
| Description: | Fraud prevention service |
| Available: | Now |
| Pricing: | $29.95 set up plus $0.09 per verification |
One thing that never ceases to amaze me is the frequent stories in the media about how consumer concerns about credit card fraud is one of the most significant factors restraining the growth of e-commerce. The reality is that most consumers have very limited liability (and often no liability) for fraudulent online transactions using their credit card numbers, and it is the Web merchant that bears all the costs.
E-tailers are naturally right to be concerned about fraud: not only can it cost them a lot of money, but high levels of fraud can result in them losing their credit card merchant accounts and so effectively put them out of business. Last year I published an article titled How to Beat Credit Card Fraud and not surprisingly it is still one of the best-read items on the site. The piece resulted in me receiving a lot of email with the most common questions asked being about whether online fraud was really a significant problem or not. At the time of writing the article I was unable to get any firm figures on this. However, a recent survey has shown just how bad the problem really is, with online fraud levels being 12 times higher than in the brick-and-mortar world.
Obviously, anything that can help merchants reduce their exposure to fraud needs to be considered seriously. There are a number of tools and techniques available (see How to Beat Credit Card Fraud) but here I want to concentrate on a new tool from iVerify called the iV-Caller Verification Service.
The principle behind iV-Caller is very simple. One of the problems with AVS (Address Verification System), which is the mainstay of fraud protection in the US, is that it provides no protection for Web merchants selling downloadable products because a fraudster can get hold of a valid address that matches a stolen credit card number. To try to overcome this shortcoming, iV-Caller ensures that all customers provide a valid telephone number and that they can be contacted at that number.
Here’s how it works:
- iVerify provides merchants with a short piece of code that they add in to a registration form on their own Web sites (merchants who lack the technical savvy to do this can pay iVerify an additional fee to install it for them). The code adds in some additional fields to the form.
- During the registration process consumers are asked to provide details of a telephone number where they can be contacted, when they want to be called and finally they chose a 6-10 digit code for themselves.
- This information is passed to the iVerify server that then makes a telephone call to the consumer. When they receive the call the consumer is prompted to enter the code they selected by punching the buttons on their phone.
- If the code is entered correctly the consumer is successfully registered.
At the time of writing the service does have some limitations. The biggest problem is that it only verifies that the customer was available at a telephone number at a particular time and not that they can always be contacted there. Although the service can be configured to force the customer to provide a valid landline number (as opposed to a cell phone or pager number) the system is still far from unbeatable. A significant improvement is planned in the near future that will match the phone number to the address submitted. However, the system as it stands will still probably deter all but the most determined of fraudsters – after all they will be able to find much easier pickings elsewhere on the ‘Net.
Another limitation is that iV-Caller currently only works in the US and Canada although further international expansion (including non-English language versions) is planned.
So how much does it all cost? Well, the service itself is good value with a $29.95 set up fee and a $0.09 per verification charge. However, it is very important to take in to account the TOTAL cost of employing this service – there are other cost elements that need to be considered that are likely to be much higher than the charges that iVerify levies.
First off, the system itself is liable to deter a certain proportion of genuine shoppers. Not only does it require that they pre-register before making a purchase (one of my pet hates in any Web store), but the whole “chose-a-code-and-we’ll-call-you-back” process is likely to put off even more potential customers.
Secondly, as with all fraud prevention systems there will always be a certain number of “false negatives” declared, for example when a customer mistypes their telephone number or forgets their code, or when the iVerify server is unable to successfully make a call to the number provided. And I feel that this problem is likely to grow when the expanded service that matches a telephone number to an address is launched.
Verdict: The iV-Caller system should deter all but the most determined of fraudsters. However, only you can decide whether or not the total cost of employing this service in your Web store is worth the potential reduction in fraud it will bring.
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