Safeguard Your Business from Card Testing

Safeguard Your Business from Card Testing

Table of Contents

1. Introduction
2. What is Card Testing?
3. How Does Card Testing Impact Merchants?
4. The Loon Algorithm and Card Testing
5. What to Do if You Have Been Impacted by Card Testing
6. Preventing Card Testing
   • Implementing Google reCAPTCHA
   • Monitoring and Logging
   • Velocity Checks
7. Balancing Fraud Prevention and Customer Experience
8. How to Handle Refunds from Payment Processors
9. Conclusion
10. FAQs

Article: The Problem of Card Testing and How to Protect Your Business

Introduction

Card testing has become a growing issue for online merchants, payment processors, and card networks like Visa and Mastercard. This fraudulent activity involves malicious users attempting to test stolen credit card information to see if it is still valid. While the fraudsters may not be directly stealing from the merchants, their actions result in significant financial losses due to per transaction fees and potential chargebacks. In this article, we will delve into the various aspects of card testing and discuss strategies to protect your business from this problem.

What is Card Testing?

Card testing refers to the act of fraudsters submitting credit card transactions to legitimate merchants with the sole purpose of checking if the card details are still functional. These individuals exploit an algorithm known as The Loon algorithm, which governs the validation process of credit cards. By generating a large number of cards and making small transactions, the fraudsters identify which cards are valid. Once they discover a working card, they can then proceed to make larger purchases or engage in other illicit activities.

How Does Card Testing Impact Merchants?

For merchants, the impact of card testing can be devastating. A sudden influx of thousands of transactions can overload their systems and result in increased per transaction fees. Additionally, if any of these fraudulent transactions are approved, the merchant may face chargebacks, further adding to their financial losses. The per transaction fees, which may seem insignificant on a normal day, become a significant burden when faced with thousands of unauthorized transactions.

The Loon Algorithm and Card Testing

The Loon algorithm is an essential part of the validation process for credit cards. It follows a specific pattern and structure, allowing fraudsters to make educated guesses about the validity of a card. By generating a large number of cards and testing them against unsuspecting merchants, these criminals can determine which cards are functional. This knowledge is then utilized to carry out more nefarious activities, such as purchasing stolen goods using a different merchant.

What to Do if You Have Been Impacted by Card Testing

If your business has been targeted by card testing, it is crucial to take immediate action. The first step is to notify your payment processor about the situation. Inform them about the sudden surge in transaction attempts and explain that you suspect card testing may be the cause. It is advisable to temporarily take your online store offline until the issue is resolved. This prevents further testing by the malicious user while you investigate.

Preventing Card Testing

To protect your business from card testing, there are several preventive measures you can take. One effective method is to implement Google reCAPTCHA on your website. Unlike the older versions that required users to decipher squiggly text or select specific images, the frictionless version of reCAPTCHA requires no interaction from the user. While not perfect, this tool helps prevent unlimited attempts by malicious users.

Monitoring and logging your transactions is another essential step in combating card testing. Regularly check your control panel for any suspicious activity, especially in the aftermath of an attack. Ensure that your implemented reCAPTCHA is functioning correctly and successfully blocking fraudulent transactions. By actively monitoring your system, you can prevent the return of malicious users and minimize the risk of further card testing.

For those with programming knowledge, setting up a velocity check can be a more advanced solution. This involves your server monitoring the number of declined transactions within a specific timeframe. By setting thresholds, such as a maximum number of declines in a ten-minute interval, you can automatically disable your order form or send alerts to address the situation promptly. Velocity checks allow your server to intelligently respond and shut down fraudsters before they cause substantial damage.

Balancing Fraud Prevention and Customer Experience

While it is crucial to implement security measures to mitigate card testing, it is equally important to strike a balance that does not impact your legitimate customers. Adding excessive barriers and requirements, such as user accounts before checkout, can significantly impede the user experience. It is essential to find the right balance between frustrating fraudsters and ensuring a smooth shopping experience for your customers.

How to Handle Refunds from Payment Processors

When seeking a refund for the per transaction fees incurred during a card testing attack, it is essential to communicate with your payment processor. While they may not be responsible for the attack itself, it is reasonable to request the refund of any fees that are not fixed costs. Most payment processors understand the situation and will refund the fees accordingly to ensure their merchants do not suffer additional financial losses.

Conclusion

Card testing is a growing problem that poses significant financial risks for online merchants. By being aware of this issue and taking proactive measures to prevent it, you can safeguard your business and minimize losses. Implementing tools like Google reCAPTCHA, monitoring your transactions, and setting up velocity checks are effective methods in thwarting card testing attempts. Remember, finding the right balance between fraud prevention and customer experience is crucial for the long-term success of your online business.

Highlights:

• Card testing is a significant problem for online merchants, payment processors, and card networks.
• Fraudsters exploit the Loon algorithm to test stolen credit card information.
• Merchants face financial losses from transaction fees and potential chargebacks.
• Immediate action should be taken by notifying the payment processor and temporarily taking the online store offline.
• Preventive measures include implementing Google reCAPTCHA, monitoring transactions, and using velocity checks.
• Balancing fraud prevention and customer experience is crucial.
• Communication with payment processors is essential to handle refunds of fees.
• Proactive measures can mitigate the risks of card testing and protect online businesses.

FAQs:

Q: How can card testing impact merchants? A: Card testing can lead to an increased number of transaction attempts, resulting in higher per transaction fees for merchants. Additionally, if any of the fraudulent transactions are approved, the merchant may face chargebacks.

Q: What is The Loon algorithm? A: The Loon algorithm is the algorithm that governs the validation process for credit cards. Fraudsters leverage their knowledge of this algorithm to guess the validity of a credit card and then test it against unsuspecting merchants.

Q: What should I do if I suspect my business has been impacted by card testing? A: If you suspect card testing, notify your payment processor immediately and temporarily take your online store offline. This helps prevent further testing while you investigate the situation.

Q: How can I prevent card testing on my website? A: Implementing Google reCAPTCHA and regularly monitoring and logging your transactions are effective preventive measures. Consider setting up velocity checks for more advanced protection.

Q: How can I balance fraud prevention and customer experience? A: It is important to find a balance between implementing necessary security measures and ensuring a smooth shopping experience for your customers. Excessive barriers and requirements may negatively impact the user experience.

Q: Can I request a refund of the per transaction fees from my payment processor? A: Yes, it is reasonable to request a refund of fees that are not fixed costs from your payment processor. Most payment processors understand the situation and will refund the fees accordingly.