Fraud is a growing concern of businesses in the modern world, where transactions are increasingly taking place over the internet. As e-commerce grows, so does the amount of fraud that businesses face. According to some estimates, businesses lose billions of dollars every year due to fraudulent transactions. To combat this problem, businesses have started using various tools to identify and prevent fraud. One such tool is BIN verification.
BIN, or Bank Identification Number, is a unique six-digit number that identifies the issuing bank of a credit or debit card. BIN verification is the process of verifying the authenticity of the card based on its BIN. When a transaction takes place, the BIN is checked to see if it matches the bank that issued the card. If the BIN is not valid, the transaction is declined, preventing fraudulent transactions from occurring.
When a transaction is initiated, the merchant sends a request to the payment gateway to authorize the transaction. The payment gateway then sends the request to the acquiring bank, which is the bank that processes the transaction. The acquiring bank then sends the request to the issuing bank, which is the bank that issued the credit or debit card.
When the issuing bank receives the request, it checks the BIN to see if it matches its records. If the BIN is valid, the issuing bank sends an authorization code to the acquiring bank, which then sends the code back to the payment gateway and the merchant. If the BIN is not valid, the transaction is declined, preventing fraud from occurring.
BIN verification offers several benefits for businesses looking to prevent fraud. Firstly, it helps businesses avoid chargebacks, which are costly and damaging to a business's reputation. When a fraudulent transaction occurs, the cardholder will usually dispute the charge, which can result in a chargeback. Chargebacks can be expensive, and too many chargebacks can lead to a business having its merchant account terminated or being added to a blacklist.
Secondly, BIN verification helps businesses identify and stop fraudulent transactions before they take place. By verifying the BIN, businesses can ensure that the card being used is legitimate and has not been stolen or cloned. This can save businesses time and money, as they can avoid having to deal with fraudulent transactions and their consequences.
Businesses can implement BIN verification in several ways. Some payment gateways offer BIN verification as part of their service, while others require businesses to use third-party services to perform BIN verification. In either case, businesses will need to provide their payment processor with access to their BIN database.
It's important for businesses to keep their BIN database up to date to ensure accurate verification. BIN databases need to be updated regularly to include new banks, as well as to remove banks that have ceased operations or changed their BINs.
Businesses can also use fraud detection software, which can help identify and prevent fraudulent transactions based on various factors, including the cardholder's location, purchase history, and other data.
As businesses continue to conduct more transactions online, the need for effective fraud prevention tools becomes more important. BIN verification is an effective way for businesses to prevent fraud and avoid chargebacks. By implementing BIN verification and keeping their BIN database up to date, businesses can protect themselves from the financial and reputational damage that fraud can cause.