What is carding and how can I prevent it?
Carding is a form of credit card fraud where thieves use stolen credit cards to charge prepaid cards and sell them to other people. People perpetrating this type of fraud are called "carders". Because credit cards are often canceled quickly after being lost, a major part of carding involves testing the stolen card information to see if it still works. One way thieves test card information is by submitting purchase requests on the Internet, something that can impact merchants.
Investopedia has a great article for learning more about carding: https://www.investopedia.com/terms/c/carding.asp
The rest of this document refers to Payflow solutions that can help you detect and prevent carding activity.
Reacting to carding activityCredit card fraud can be a significant problem for merchants. If you are a victim of fraud or suspect fraudulent transactions, take the following actions:
- Contact your merchant bank and notify them that fraudulent activity has taken place.
- Issue a VOID or CREDIT to the card or cards to avoid chargeback fees from your merchant bank.
- Verify the security of your login and password information both internally and on your website.
- In PayPal Manager, change the password of the account used to process transactions. After you reset your account password, you can then reset the password within your web server. Your shopping cart or application password must match the new password you create, otherwise, transactions will fail with a User Authentication/Result Code 1 error.
- Contact your Internet Service Provider (ISP) or hosting company to see if they have a record of the IP addresses where the fraudulent transactions came from. Next, have your account restrict access from those IP addresses.
- Contact PayPal Merchant support by phone at 1-888-883-9770 or by email at email@example.com for additional information, including the credit card number if needed.
- File an internet complaint on the ic3.gov website.
- Complete a full virus and malware scan of all systems involved including your website and computer stations.
- If you are using the same account to process transactions and to log into PayPal Manager, it is HIGHLY suggested that you also set up a new Payflow Pro API user account within PayPal Manager. Setting up a new account ensures that changes to your PayPal Manager password will not prevent the processing of your transactions. Also, if a hacker compromises the API user account, they cannot log into the PayPal Manager and make changes to your account.
Detecting and preventing carding activityAs with any other fraudulent activity, there is no magic bullet to detect and prevent all carding. We suggest implementing a layered payment review process, including the following features and activities:
- Use a CAPTCHA—CAPTCHA (Completely Automated Public Turing test to tell Computers and Humans Apart) creates challenges to ensure that payment attempts are not sent by automated scripts.
- AVS responses—The Address Verification System (AVS) checks the billing address that buyers provide at checkout against the address that the credit card company has on file for them. The credit card company sends a response immediately to let you know if the billing address matches. The common responses are:
- Y—full address match
- A—address match only
- Z—only the zip code provided matches
- N—no information matches. The credit card company will not stop a transaction if the AVS response is N unless the card has been reported lost or stolen.
The AVS system works in the U.S., Canada, and the U.K. only. Credit cards issued from any countries that do not support AVS may return the following responses: U (AVS unsupported), S (AVS system unavailable), or G (Global card.) See the Payflow Developers Guide for more information on AVSADDR and AVSZIP.
- CSC responses—The Card Security Code (CSC) system check the 3 or 4 digit number of the credit card and verifies it during the authorization processes. The common responses are:
- N—does not match
- X—unknown or no response
You should only accept transactions where the CSC matches. See the Payflow Developers Guide for more information on CVV2MATCH.
- IP geolocation checks—Doing IP geolocation checks is a way to match the IP that the user is accessing your website from against the billing address that they provide when they check out. In addition to checking the IP against the billing address, you should also check to see if the user is accessing your website using a proxy IP. A proxy IP is generated through free or paid services that make it appear that the user is accessing your website from a location other than where they actually are. If the user's billing address is in one state (Nebraska) but their IP is in another state (Florida), it is possible that they are traveling but this should not be assumed. This type of mismatch warrants a closer look at the user's information.
- Credit card BIN checks—The Bank Identification Number (BIN) is the first six digits of every credit and debit card. Not only does it provide information regarding the type of card that is being used (Visa, MasterCard, American Express, or Discover), but it can also be used to find the name and location of the bank that issued that particular card. This information can be very important in detecting carding. Typically, you should see a wide dispersal of cards with the same BIN. For instance, you may receive two payments from cards with the same BIN in a month; with carding, especially if credit card information has been purchased online, you may receive ten payments from cards that have the same BIN, within a day or two. Tracking BINs may help identify this activity.
- Machine ID/device fingerprinting—This can be used to identify problematic or fraudulent customers. It is commonly offered by third-party fraud management companies to determine whether or not a user is repeatedly visiting a merchant's site using different payment attributes (names, addresses, IPs, credit cards, computer browsers, etc.) to mask their identity. Fraudsters may visit your site often and make several purchases using different payment information, but the device that they use to make the purchase will be the same.
- Velocity checks on your shopping cart—This suggestion refers to checks on your shopping cart, not Payflow fraud filters. Velocity is the number or speed of payments made within a certain period of time, for example, 10 payments sent from the same customer within seconds or minutes of each other. Monitoring this activity is important. Even with donation sites, it may be unusual for a user to make low dollar payments in rapid succession. Payment velocity can be monitored by dollar amount, user IP, billing address, BIN, or device.
- Shopping cart session velocity—This refers to the number of times that one buyer can attempt to complete an order in one shopping cart session. By putting a limit on the attempts in one checkout session, you have visibility into the number of shopping cart declines which may assist in identifying a possible carding situation.
- Authorization/capture—If you are using authorization/capture, review the transactions during the authorization period. If you believe that you are being targeted by carding activity, do not capture the funds. If you have already captured the funds, you have the option to issue a refund rather than wait for a chargeback.