Address Verification a Colossal Problem for Cross-Border Merchants

Cross-border merchants need more information on which fraud mitigation solutions are best for cross-border transactions, according to LexisNexis Risk Solutions’ 2016 True Cost of Fraud Study, which was released this week at the Card Not Present Expo in Orlando.

Aaron Press, Director of Ecommerce and Payments at LexisNexis Risk Solutions, says a multi-layered approach that includes identity verification, said many of these cross-border merchants (referred to in the report as international merchants that operate from the U.S. and do business globally) don’t feel that they’ve got specialized tools for international fraud prevention, while at the same time they are challenged to readily identify what those solutions would be.

The report concludes that identity authentication and transaction risk assessment can reduce false positives and the need for manual reviews. While this may not slow the volume of fraud attempts, it can reduce the level of successful fraud transactions and the associated costs of such losses.

But the biggest challenge, Press told Multichannel Merchant, is trying to validate addresses and trying to validate identities and make sure these customers are real people.

“It’s a colossal problem. There are hundreds of countries and hundreds of different regimes, and they all have different regimes around what information can be collected, how it can be shared, and so we’ve had to work globally with partners to really get all that together,” Press said. “When you think about how hard it is for someone like, us who aggregates all this information. If you’re looking at a merchant who is trying to solve it on their own, it’s really a big challenge.”

Press said he thinks there are some other great tools for international, such as device fingerprinting and geolocation attributes. But ultimately, what LexisNexis wants merchants to go back to over and over is address verification.

“One of the biggest challenges of creating a product like that is the address formats come in non-standard ways,” Press said. Postal codes have different formats, where you put the number, how the street is formatted. Normalizing all of that down to a set of parameters that can be published on an API is a huge challenge.”

The report recommends that cross-border merchants who sell through the online and/or mobile channels should complement their multi-layered approach with solutions unique to cross-border issues. According to the report, cross-border merchants can’t necessarily rely on the same solutions to support both domestic and international fraud management. There tends to be a false sense of security through perceiving Card Verification Value (CVV) and PIN/Signature Authentication as being most effective for combatting international fraud; the former can be rendered ineffective with breached card information and the latter is more relevant to the physical POS environment (since remote purchases generally don’t require PIN entry).

The methodology of this study targeted U.S. Retailers with a comprehensive survey of 1,007 risk and fraud executives in retail organizations conducted during February 2016. Respondents represented all channels, company sizes, industry segments, and payment methods. The overall margin of sampling error is +/- 3.1% at the 95 percent confidence level. Data reflect the U.S. Merchant population based on weighting to U.S. Economic Census.

Tim Parry is Multichannel Merchant’s Managing Editor, and the lead programmer for Growing Global.