Paymentech

To reduce internal fraud, restrict refund capabilities to managers only. And restrict employees' access to customers' full credit card numbers. —Tonya Carroll, product manager, Paymentech

To reduce customer fraud, create an in-house negative file. Block the names, addresses and credit card numbers of customers who've given you trouble in the past or who you suspect are fraudsters. Also, double-check customers who request that their orders be shipped to post office boxes. —Tonya Carroll, product manager, Paymentech

Merchants in card-not-present environments must be especially cautious about customer fraud. Train your contact center reps to look for the following red flags when talking with callers: * If the customer wants any product for any amount in any color, and wants the products shipped to multiple addresses. * The bill-to and ship-to addresses are different. Hint: Don't allow your shipping company to change the ship-to address after the order has been placed. * Rush orders for new customers. Why are they in such a rush? They may be anxious about the credit card's true owner learning of the theft.

For catalogers, payment fraud accounts for a high cost of doing business. On the Internet alone, estimates are that losses from payment fraud exceeded $1.6 billion in 2003. For direct-response merchants, credit card fraud losses averaged 1 percent of orders in 2003, which may not sound exorbitant, but in terms of total sales, the costs are huge. The good news is that online fraud losses declined from 2.9 percent of total online revenues in 2002 to 1.7 percent in 2003, according to Cybersource Corp./Mindwave Research. The cost to your customers also is high, because for every fraudulent order, merchants reject another three or