February 14, 2008, 12:00 AM

New risk-management system detects prepaid gift card fraud

BSG Clearing Solutions, a provider of risk management tools for e-commerce merchants and communications service providers, has introduced an application for guarding against prepaid gift card fraud.

BSG Clearing Solutions, a provider of risk management tools for e-commerce merchants and communications service providers, has introduced an application for guarding against prepaid gift card fraud.

The new Card Identification System combines the identification of the specific card type and card class with usage data and sophisticated analytics to identify prepaid payment cards, many of which are sold as gift cards, and track purchase attempts. BSG serves 500 merchants.

Prepaid cards pose particular fraud problems for online retailers because the cards are disposable, anonymous and don’t lend themselves to security techniques like address verification, says David Guerin, vice president of operations.

The Card Identification System uses data collected as BSG processes transactions for its entire merchant base to determine the risk of individual transactions. “Our risk management system is monitoring purchase behavior across multiple merchants, across entire industries,” he says.

When a purchase is made, the system checks other activity associated with that card number, Guerin says.

“Our system looks at all of the history we have on that card, all of the history we have on that e-mail address, phone number, billing address, any data point we might have,” he says. “We look at all of the history and the relational history between those data elements, and when we return a response, our risk management decision is included with the authorization response.”

For example, if the same card is used multiple times but with multiple names or the same e-mail address has multiple shipping addresses, the system will flag the transaction as possibly fraudulent, Guerin says. The entire process takes about 1-1/2 seconds.

BSG’s Card Identification System also gives merchants added insight into their customers` purchasing behavior, allowing them to make better business decisions and optimize their marketing campaigns, he says.

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