Guys, so this basically the question. Yes, requesting 3 digits security code on credit card is one way. But is it enough? And what about PayPAl? Could you please advise what other methods can be used to not just reduce, but ideally eliminate consumer fraud? Thank you.
Use a manual payment gateway. It's the safest way. You can reduce fraud rates considerably. Real-time payment gateways and payment processor (like paypal) are a heaven for fraudsters.
The only way to eliminate fraud is to work for someone else so you don't have to accept credit cards. If you make the payment process to complicated as hhsaus suggest your will lose customers. If you are have a real problem with fraud maybe you should consider using a different approach. You can find some alternatives here http://forums.digitalpoint.com/showthread.php?t=1990017 This will help you get back to the job of selling and let someone else worry about the fraud, to an extent.
What's so complicated about a manual payment gateway? Your customers don't notice a thing. And they also get extra security (since manual payment gateways do not permanently store sensitive credit card data unlike real time payment gateways and payment processors). A manual payment gateway won't eliminate fraud (fraud will always be here), but it will reduce it significantly.
You are giving to much credit to the average internet buyer. The vast majority of internet buyers have no idea whats the difference nor do they know that their information Is Not being saved. As a matter of fact they have been told that using services like PayPal is MORE SECURE because they are not GIVING OUT their CC number to websites when making purchases. I agree that when selling t the "Online" community you can most defiantly use a manual gateway and most of us would never bat an eye to using it. But you take a mother of 3 who is buying an ebook/video on how to cope with children. She is NOt going to want to give you her name address etc. And she will not understand it's safer and there is NO Way you could educate her in the few seconds you have when trying to sell her your product. That is way I am saying it's complicated. You know ho much time and effort it takes to sell a product. How much time will it take to "Educate" the buyer and convice them your way is better when it goes contrary to what they being told by the Real-time processing companies.
I thought the orginal poster already uses some kind of a merchant account as they have mentioned the 3 digits security code. So obvioulsy their customers are happy to pay with credit cards directly instead of using paypal. Thats what i was refering to when i said their customers would not notice a thing if they were to use a manual payment gateway instead of a real time one. It wouldn't really affect their customers' experience (i.e. making it harder in any way to shop/place order). It's a different story that some consumers out there are being brain washed by paypal into believing that paypal is safer and more secure. PayPal only has a small share of the online payments market.
Yes, you are right I missed the comment about the 3 digit code, but if they are using a merchant account would you have already set your merchant account up so you are using a manual payment gateway? I don't know why someone should be using anything else. Lastly, he stated but ideally I don't understand how using a manual gateway is going to do this. Someone willing to use false information doesn't care whether the site/processor is "Storing" information or not.
A manual payment gateway lets you, the merchant, decide whether to accept a payment or not. A payment is not automatically deposited/approved into your merchant account. You have the option (besides any built-in security checks) to conduct your own checks (i.e. calling the customer if something is suspecious). A manual payment gateway certainly won't work well for a high volume transaction site. But if your one man ecommerce site averages up to 30 or so transactions a day it is certainly well worth it (it doesn't take a lot of time to check/approve/deny transactions).