Common anti-fraud measures are becoming less effective

Some of the anti-fraud measures most commonly used by online merchants are losing their effectiveness, says Julie Fergerson, vice president of emerging technologies for Debix Inc. and a member of the board of the Merchant Risk Council. She spoke Monday at the Internet Retailer 2006 Conference and Exhibition in Chicago.

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“Merchants must continually invest in new tools,” Fergerson said, noting that as the number of merchants adopting a specific anti-fraud measure grows, the effectiveness of that tool decreases.

That’s because as crooks learn about new anti-fraud tools, they develop ways to circumvent them, Fergerson says. And they know what information is needed to make a card transaction look legitimate, including card verification numbers. “The best practice is to use all the fraud tools available to you,” she says.

One new anti-fraud measure that is proving effective is the so-called positive file, a list of customers that the merchant has sold to before without fraud, Fergerson says. The positive file helps cut costs because the retailer doesn’t have to send every transaction through a fraud screen, but only transactions from customers not on the list.