09/22/2011 06:13 pm ET | Updated Nov 19, 2011

The Best Fraud Detection Tools for E-commerce Businesses

Fraud is one of the biggest worries for both the customers and the owners of online stores. None of us want criminals to get their hands on our card details, while entrepreneurs risk losing goods, money and potentially the ability to trade, unless they can keep their websites safe.

Fortunately there is a whole range of anti-fraud features available, which can help protect both parties. The most popular ones among them are:

1. The 3rd Man - This security system uses a variety of data to verify whether a given transaction is genuine or not. Some of the details being taken into consideration by the system include e-mail addresses, home and delivery address, card numbers and even IP address of the computer on which the transaction is being made. This allows the 3rd Man to give the purchase a score and allows the merchant to reject any risky transactions.

2. 3D Secure - A security protocol, originally developed by Visa, with a similar service now also adopted by Master Card (MasterCard SecureCode). It asks the cardholder to setup an additional password for when their card is used in online transactions. Following this, each time someone tries to complete a purchase using thus card, they will be asked to enter parts of the set password. This gives more confidence to both the shopper and the business owner, as without that password the given card simply will not work online. This tool also shifts the liability from the merchant to the card issuer.

3. AVS (Address Verification Service) - It is used to verify the address linked to the card being used in a transaction. This system checks the details entered by the customer against the information in the database of the card issuer and can alert the merchant when this information does not match.

4. CVV Card Verification Value (also known CSC - Card Security Code) - This is the last three or on some cards last four digits of a number printed on the signature strip of a card. It allows the merchant to verify that the person making the purchase is in the possession of the card. The Payment Card Industry Data Security Standard (PCI DSS) do not allow merchants to store the CVV numbers post transactions, in yet another attempt to help prevent fraud.

Fraud protection is crucial to all parties involved in online trade. Nobody wants to become a victim of such crime and the above tools help to avoid a lot of distress. However the big problem merchants face is the fear of rejecting a genuine consumer. This is where the ability to closely scrutinise each purchase can save merchants and genuine shoppers any embarrassment and potential problems when making and accepting online payments.

Retailers whose websites are not secure enough also risk receiving large numbers of chargebacks or even being banned by card issuers from processing payments.

A lot of security fears can be avoided through cooperation with top level payment service providers, who can help not only with the security features mentioned above, but can often offer bespoke solutions.

Fraud prevention has to be treated seriously by everyone involved if the e-commerce market is to carry on growing.