The
new service to reduce card fraud and assist compliance with legal
age restrictions comes from payment service provider Metacharge.
Working with 192.com it integrates the automated age and identity
checking service with payment processing.
It isn't cheap: at £1.50 per query, Metacharge is targeting only
the high-risk operators, in particular the online gaming industry.
But the London-based company also points out that fraudulent card
usage is costing over £1 million a day in the UK.
Managing Director Scott Law told OUT-LAW that online gaming "is
a magnet for fraud". He said that the fastest growing form of
identity theft is not phishing; it is taking the identities of dead
people and using them to get credit. So a check against a mortality
database tells an offshore internet casino if its latest poker
player is a corpse.
"Anyone with age-restricted goods or services or high value
items, like consumer electronics, can benefit," said Law. It may
also be of interest to banks taking online credit card
applications, although Law is focusing on his gaming industry
customer base for now.
This customer base has a good opportunity for growth over the
next two years.
Currently, it is legal for British residents to bet or gamble
online from home. About 800,000 adults do so every month, according
to the Department of Culture Media and Sport. It is also legal to
run a site in the UK that takes bets for, e.g., horseracing.
However, it is not lawful for a company to run an online casino
if its equipment and payment processing are in Britain because the
Gaming Act of 1968 requires punters to be present in person where
the gaming is taking place. This is set to change.
The law will relax when provisions of the Gambling Act 2005 come
into force which introduce a licensing regime for internet
casinos based in the UK. It also requires that systems be put in
place for internet betting and gaming to ensure that under 18s are
excluded. At present, under-18s are not allowed to gamble, but
there are no clearly stated requirements for operators to ensure
they do not take bets from under-18s.
Many observers believe that UK internet gaming will take off
when the law changes, at a date still to be determined but probably
not later than September 2007. (Others are doubtful: British
companies like Ladbrokes already run legal internet casinos through
offshore subsidiaries, so the barriers to market are not
insurmountable.)
With Metacharge's Verify Your Customer (VYC) system, merchants
can automatically authorise or decline transactions based on the
results. They can also set the system to hold a transaction,
triggering a manual check. The customer might then be asked to fax
a copy of his driving licence and a utility bill.
About two or three customers in 10 will trigger the need for a
manual check. But Law points out that before tools like this, all
tests were manual, adding much more significant running costs to
gaming operations.
The VYC system runs a geographic IP address lookup. Law says the
accuracy of such checks has improved greatly in recent years. "It
used to be that all AOL accounts looked the same, but not any
more," he said.
The first six digits of any credit card identify the issuing
bank and country. Metacharge's service reports this information to
the merchant – together with the country and city submitted by the
cardholder and the distance in miles, if any, from his IP address
to his street address. Some countries are hotspots for fraud – Law
is particularly wary of Nigerian, Malaysian and Thai addresses.
The system also reports the number of chargebacks received from
the card in use and from the customer's IP address.
The date of birth of the cardholder is also required – although
lies will likely be spotted and the merchant again has the option
to accept or decline or hold the transaction.
"Some things are a real giveaway to fraud," said Law, "other
things build up a picture and you can very quickly learn to
interpret it."
