Dater Beware: How Dating Sites Can Prevent Credit Card Fraud

This is a guest blog by Thomas Pinter, Head of Digital Entertainment at Secure Trading.

Fraud has long been a problem in the dating industry, and by that I don’t mean users posting old profile pictures from when they were five years younger and two stone lighter. Credit card fraud is rampant across all “high risk” industries, from dating services and adult entertainment sites, through to payday loan providers and niche retailers. Fortunately, dating sites and their users are by no means helpless to fight back against the growing threat.

Fake users on dating websites typically consist of criminals creating multiple premium accounts with stolen cards in order to scam users. For users targeted by these criminals, online dating can very quickly turn into a nightmare, causing emotional and financial trauma. Protecting them is a must, from an ethical standpoint as well as with a view to keeping them happy and retaining their business. However, this presents a number of logistical and technological challenges and can be a huge drain on finances and resources.

Like many ecommerce businesses, dating sites need the agility and flexibility to manage large pools of subscribers, alongside shorter term or one-off customers. Managing subscriptions, also called recurring payments or continuous authority transactions, can be simple to set up but the world of card payment processing is a complex and regulated minefield. Governed by some of the world’s best known brands like Visa, MasterCard, American Express, JCB and Union Pay, these behemoths of money remain the constant in an ever-evolving payments landscape.

For subscription-based online dating sites, an essential part of keeping these behemoths happy is informing users when the next payment will happen, in order to make them aware of the subscription model. I’ve mentioned fake and criminal users already, but most fraud in the dating industry actually comes from friendly fraud and users not remembering when the next subscription will start — which still results in chargebacks and has a negative impact on conversion rates.

Maintaining conversion and approval rates are essential for any successful dating site. One of the biggest stumbling blocks is that dating businesses taking payments online use the same 7273 Merchant Category Code (MCC) as the escort industry. Given how the escort industry has evolved, certain issuers have tried to distance themselves and their customers from it by blocking the MCC Code — to the detriment of any cardholder wishing to use a dating site. This shift in ideology has naturally affected conversions for dating businesses as the cardholder’s quest for the perfect partner is intrinsically linked to escort services. The kick on from all of this is that the merchant itself struggles with conversion rates.

The upside of this is that dating sites require sophisticated counter-fraud solutions and fraud screening processes. Defining good and bad users is important whenever payments are involved (i.e for premium rather than free dating services), but implementing solutions such as 3D secure can result in less users signing up. Dating sites require a payment solution which can seamlessly assess client rates in detail and tell the difference between a genuine user looking for love, and a criminal looking for their next payoff.

One of the simplest solutions to the problem is tokenisation. Tokenisation solutions provide a reference number (or token) that is used in place of the card number for all refunds or repeat transactions — in the dating industry this covers subscriptions. By using tokenisation or card store, dating sites can improve conversation and approval rates from acquirers. Estimates suggest that they can also cut the PCI compliance bill by more than 50%, because both solutions take care of the storage of card numbers, a crucial element of PCI compliance.

It’s important to note that the vast majority of dating sites do tend to have good internal tools to filter fraud. However, extending this expertise across the entire organisation and to the point of payment is essential.

By Thomas Pinter

Thomas is head of Digital Entertainment at Secure Trading.

Secure Trading is one of the world’s leading independent payment service providers. They help online businesses succeed through cutting-edge technology, world-leading expertise and a culture dedicated to trust.