Almost all Payment Gateways come with some sort of Fraud Prevention Tools. They are labeled or branded under different names of course, but basically there all the same. The most common name for the tools is called AVS or Address Verification Service.

AVS depending on how strong you set it up matches information in the shipping address to what the credit card Issue Company has on file. You can set it up to match the street address, postal code or both.

Implementing AVS comes with a couple of price tags. First your payment gateway may charge you up to $3.00 a transaction for AVS. Second, many customers, about 5% don't have their shipping information setup correctly with the credit card issue company, resulting in a decline. So you have to have a backup plan if you plan to use AVS.

Now if your just selling a service that does not require shipping, then AVS is not required.

The other tool is the use of the CVV2 number on the back of credit cards, or the front of American Express. This number is a second form of authentication with CNP (Card Not Present) transactions. When you swipe a card in a credit card terminal, you physically have the card in your hand, and can check the customers ID such as a drivers license to verify their identity. When purchasing from a online store, you can't see the card or their ID, so you turn to the CVV2 number as proof.

Preventing fraud is the single most important thing you can do to protect both you the merchant from loss of revenue, and protecting your customers from data or personal information theft. This is a two Way Street in which both parties must work together to combat online crime.

Paying a small fee to protect your online business from being scammed is a small price to pay. I would rather pay an extra dollar to prevent losing a hundred dollars in mechandise. We can refer to this as insurance. If you could devise a way to handle AVS decline errors, and rescue them so you don't lose the sale, while being able to dump the the true scams, then the best possible outcome will occur.

It's been my experience that customers don't mind getting a AVS Decline, because they know they are being protected from fraud and abuse. Like I said, it's a 2 way street.