Clickatell Credit Card Fraud Reduced to Zero using SMS Solution
October 17, 2002 Clickatell, as a global mobile solutions provider, has had client registrations from over 180 countries. Along with this, over 95% of revenues that the company generates are paid by clients who are not in South Africa. This is due to the fact that Clickatell’s services are global, enabling clients to send SMS messages to almost all international GSM networks. Having such a geographically diverse client base presents the challenge of accepting payment from around the globe. Various payment options are available to clients for money-transfers, but by far the most popular is on-line credit card purchases. This method is the most accessible, simple, and immediate to use when paying foreign entities. It also presents the least barrier to usage, which unfortunately also presents the smallest barrier to abuse. This has led to Clickatell having experienced a fraud and charge-back rate of over 50% during a six-month period in 2001. Credit card numbers can be generated or stolen, or even picked up off the Internet. Internet credit card transactions are typically so-called ‘card not present’ transactions, therefore there is no face behind the transaction, no signature, no ID book, and not even proper mechanisms within e-commerce engines to do thorough address data checking. Yet, it is an indispensable payment method for a company with multinational clients. Being presented with this very real problem, and having no support from local or international fraud-prevention authorities, outsourced payment agents, financial institutions or police, Clickatell was forced to come up with innovative ways of radically reducing the risk of accepting international transactions. Adding to the challenge that Clickatell was faced with, in respect to online credit card fraud, is the fact that Clickatell has no physical product delivery. Unlike online retailers who deliver a product and can recall or trace where a fraudulently purchased item was delivered to, for Clickatell there are no signatures on delivery notes or physical delivery addresses. The solution that Clickatell has come up with has had dramatic effects, while still keeping the process accessible and fast. According to Clickatell’s operations director, Casper de Villiers, the only way to evaluate the success of the measures taken, is in the figures. Says De Villiers: “We have managed to reduce fraud from a crippling 50%+ to 0% for the 2002 year to date, which is almost unheard of in the e-commerce game. This, taking into account that Clickatell has experienced dramatic increases in the number of transactions and the mean transaction amount, is significant for our bottom line and our merchant status.” “What we have done,” De Villiers continues, “is to request everyone who makes a purchase by credit card to provide us with a mobile phone number to which we send an account activation code. This code is then used by the client to get immediate on-line activation of his account, which in turn enables him or her to begin processing credit card transactions.” Mobile numbers cannot be forged or created on the fly as with e-mail addresses, and although the method that Clickatell employs may still have its gaps in the pre-paid cellular market, it goes a long way to preventing credit card fraud. Clickatell is currently in discussions with various e-commerce solution providers aiming to implement similar strategies using the Clickatell messaging platform. This being said, one needs to take into account that not all people have mobile phones, but the exceptions can then be managed with care. These methods, according to De Villiers, are of the first of its kind used on a global scale that Clickatell is aware of, and except for radically reducing fraud, there are many other benefits: It instills a sense of trust in credit card transactions, improves competence, legitimacy and management of transactions, as well as providing vendor with the direct contact details of the card user that can be used to contact the purchaser if details are dubious or incorrect. Together with other checks and balances, this mechanism has proved to be extremely effective, and although credit card risk will never go away, according to De Villiers, SMS and other mobile technologies can go a long way to dramatically reducing the risks associated with it. Clickatell continually expands its global SMS delivery capability, and believes that mobile technologies can compliment e-commerce and online payment strategies as we strive for secure and trusted transaction environments. These are simple but real and cost-effective solutions, available today, which are sure to make you sleep better at night!
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