The Use of a BIN Database for Charge Back Prevention
Over the years, online merchants have begun to fight back against credit card fraud and charge backs with the BIN database.
Every year online merchants from all around the world lose millions of dollars thinks to credit card fraud, much of which is in the form of charge backs. For those of you who are unfamiliar with the concept of a charge back, it is the return of funds to a consumer, specifically the reversal of a prior outgoing transfer of funds from a consumer’s bank account or possibly line of credit.
One of the problems is that most consumers feel that credit card fraud is a victimless crime because of the laws that protect you from any real financial loss; however, this could not be further from the truth.
When it comes to credit card fraud, it is often the merchant who has to pay the price. Unfortunately, merchants then have to raise their prices in order to cover the extra costs which means we all pay for it in the end. Credit card fraud is far from being a victimless crime and merchants are finding ways to fight back against fraud and lower their own risk.
There are currently thousands of merchants from across the globe that are indeed sick and tired of the loss that they are forced to incur from credit card fraud and charge backs. Now days, many of these merchants are turning to BIN databases for help. There are many programs available today; however a BIN database is one of the most effective. A BIN database allows merchants to cross reference credit card information that is given to them by a consumer to ensure that the transaction can be authorised.
Did you know that all major credit card companies use the BIN number system in order to track and connect their cards to their network?
When a merchant uses a BIN number database, it is possible for them to confirm that the card in question is in fact from a legitimate credit card company and not a completely fake number.
A BIN database is able to provide a merchant with a lot of information about the issuing bank such as what country it is located in and the customers billing address. A lot of other useful information can be obtained to. The merchant can then use this information to determine the risk in approving the transaction. If a credit card’s BIN number is not found in the database the merchant will usually decline the transaction. This is a smart move and helps to prevent fraudulent activity.
Also, many online merchants use BIN number databases to determine what type of card the customer is using to pay for the transaction. The reason that merchants do this is that different types of cards carry higher or lower risk. For example, prepaid cards have a high fraud rate. Often this will lead to a merchant setting up prepaid flags to alert them when a card is prepaid so that they can take a closer look or reject the transaction to be safe.
Merchants who utilise such practises in their online businesses will often prevent a high rate of fraud and charge backs.