ore and more consumers around the world purchase goods over the Internet every year, and as e-commerce sales increase so does the rate of fraud. Merchants who accept card-not-present payments are especially at risk to fraudulent activity; they need a solution to manage this risk-one that minimizes the number of fraudulent transactions and maximizes the valid ones.

"We use the term 'risk management' more than 'fraud prevention,'" said Xavier Kris, CEO of Retail Decisions, Inc. "Because there's really only one way to completely cut out fraud and that is to not process any transactions at all."

Obviously, this is an unacceptable solution for merchants, so where can they turn to for help in their fight against credit card schemes?

Hazlet, N.J.-based Retail Decisions (ReD USA), Inc., a subsidiary of Retail Decisions plc in the United Kingdom, provides automated, risk management services and offers ebitGuard, a fully customized, fully managed fraud-screening service designed to control fraudulent and disputed transactions for merchants who operate in card-not-present environments such as the Internet, cashless vending and telephone ordering.

"We've found that many merchants have tried to do this themselves internally," Kris said. "They put together a rule set that is somewhat draconian in its approach, and they end up rejecting far too many transactions that would otherwise be good."

Retail Decisions, Inc. (formerly Transaction Billing Resources), was founded in January 2000 as a demerger from the Card Clear Group. Card Clear had acquired U.S.-based Transaction Billing Resources (TBR) in 1997.

TBR provided risk management services for telecommunications companies, such as AT&T, that allowed consumers and businesses to make long distance calls using a credit card. AT&T is still one of ReD's customers today.

"Those credit card-initiated long distance calls were really the first card-not-present transactions," Kris said.

With its ebitGuard service, ReD uses several different "non-intrusive" methodologies to detect fraud, and this allows them to place recommendations on individual transactions on a real-time basis-typically in less than half a second.

ReD's solution references screening databases that contain more than 75 million known fraudulent, compromised or excessively 'chargebacked' credit card numbers. ebitGuard also has a component that predicts the probability of a certain transaction being fraudulent. A team of experienced risk analysts monitors and manages the service 24/7 and provides support on an ongoing basis regardless of the client's physical location.

ReD applies its various fraud prevention technologies and payment processing services through the entire payment cycle: from payment gateway, authorization and risk management, to settlement and chargeback processing.

ebitGuard is implemented as an application service provider (ASP) model, so the solution is fully managed by ReD. Kris said many clients are up and running within 24 hours; no training is necessary because it's a fully managed, outsourced service.

Each ebitGuard deployment is fully customized, so ReD will tailor merchants' solutions according to the vertical market in which they operate; what types of products and services they sell; what types of sub clients they have; and if they are an ISO or a merchant aggregator.

Merchant aggregators, or "master merchants," are e-commerce merchants through which other e-commerce merchants process their transactions. In some instances, master merchants may hold the merchant agreements with processors and banks. One example is GSI Commerce (a customer of ReD). Some of GSI's "sub merchants" include The Palm Store, Kmart.com and The Sports Authority.

"When a merchant or ISO approaches us and says they need to reduce their fraud problem, we analyze that merchant's data, and we create specific rules and specific processes to enable that merchant to reduce their specific fraud problem below their targeted level," Kris said.

ebitGuard also helps minimize "customer insult" rates and reduce the amount of manual review of suspicious transactions taking place.

Many card-not-present merchants train their staffs to watch for certain types of transactions (for instance, those with large dollar amounts) and to call customers to make sure they are the ones who really ordered the items. In some instances, orders don't get reviewed for days.

Kris said this process often disturbs the consumer because it negates the whole purpose of purchasing on the Web, which typically serves as a means to instant gratification. Customers purchase something and think their order is on its way, but in reality the order has yet to be reviewed by the merchant, Kris said. ReD has a long and impressive list of online retail customers, including Register.com, Foot Locker, RealNetworks, Virgin Mobile, Tesco and Wal-Mart. The majority of ReD's customers in the U.S. are card-not-present retailers.

Some of its banking and finance customers include GE Capital, Standard Bank, HSBC, NatWest, Barclays, Lloyds TSB and the Royal Bank of Canada. All major banks in the UK and South Africa use ReD's solutions.

"We view fraud as a collaborative issue, and it's in everyone's best interest to reduce it," Kris said. "That's why we have so many retail, telephony and banking customers on a global basis because they work in tandem, and more often than not, they work in tandem through us as their trusted third party in order to reduce fraud."

ReD is truly a global organization. The company's headquarters are in London, and it has a major presence in North America. It also has operations in South Africa and Australia and partners in Japan and South America.

ReD employs approximately 220 people worldwide, including 65 in the U.S. In 2002, the company reported revenue of £28.4 million (USD $48 million), an increase of 28% over the previous year.

Over the past two years, ReD has been busy carrying out an aggressive acquisition strategy.

In 2001, the company acquired NestorCommerce, developers of the PRISM suite of advanced risk management solutions for payment card issuers and acquirers.

In 2002, ReD acquired Austin, Texas-based Paysolv consulting group and re-launched it as ReD Consulting. ReD Consulting is an IT management consulting firm dedicated exclusively to serving payment providers around the world. The group has relationships with 350 clients in 40 countries.

ReD also acquired Paymentplus LLC and its LiveProcessor technology in 2002. LiveProcessor combines online, call center, retail and automated telephone transactions into a single service.

Since acquiring Paymentplus, ReD has gained as customers Buy.com, Netflix and several other high-transaction volume online merchants.

The company has several strategic partners with many large-scale organizations in the global payments market. For example, Paymentech offers ReD's ebitGuard service to its merchant customers. Montreal-based PaySystems Corp. also recently selected ebitGuard to help protect its online merchants.

"With our substantial base of domestic and international merchants, PaySystems needed a risk management partner with experience and expertise in preventing fraud on a global level," Kevin Lavigne, Director of Risk Management for PaySystems said in a statement.

"Retail Decisions' ebitGuard service offers us a proven, effective fraud prevention service for online payments-wherever the transaction originates from."

ReD also has an alliance with Chase Merchant Services. Like Paymentech, Chase markets ReD's ebitGuard to its merchant customers who accept card-not-present payments and who have problems with fraudulent purchases and the resulting chargebacks. Chase refers its merchants to ReD for electronic payment processing using ReD's LiveProcessor technology.

In its partnership with Chase, ReD recently added Dynamic Currency Conversion (DCC) to the ebitGuard solution. DCC allows e-commerce merchants to guarantee prices in local currencies, which eliminates most risks associated with currency conversion. It also eliminates card issuer and association conversion fees. ReD and Chase will market the new service to Chase Merchant Services' 84,000 merchants.

In 2002, ReD said it checked more than 1.5 billion card transactions and prevented more than 1 million card fraud attempts in the UK alone.

"It's a matter of creating balance and trade-offs between maximizing the number of good transactions and minimizing the number of bad transactions," Kris said. "And that's what the ebitGuard service delivers for each of our clients."