Merchants are usually seen as the ones fighting against illegal use of credit cards, but sometimes we hear stories portraying the stores as the criminals. One of the largest merchant fraud schemes had been performed by J K Publications (alias Webtel, Netfill, etc). JK Publications ran a sizeable fraud, somewhere in the range of 43-44 million dollars, distributed across about 900,000 credit cards in small recurrent charges ($20 US). JK Publications' front companies generated about a third of all customer complaints at one major credit card company in late 1998. Their merchant accounts had a 'chargeback' rate 100 times the national average; each time a merchant account was closed by the credit card companies, they opened a new one. In late 1998 they alone accounted for 4% of all Visa chargebacks. It took the FTC (Federal Trade Commission) almost a year long trail to win back $37.5 million out of the total amount.

The basic problems underlying this particular scam was that it was cheaper for banks to deal with angry customers, or suffer losses from fraud, than to pay the costs of robust authentication. To this day there was no available solution in the market that can prevent this type of fraudulent activity.

Merchant Fraud is basically a scheme to defraud a bank card plan, often by a merchant working in collusion with someone else. A common form is white plastic fraud, a scheme in which the merchant submits phony sales drafts to a processing bank and then splits the sales draft income with the person supplying the account numbers that were charged. Sometimes the store can use card numbers from their internal data of real customers, add phony sales to them hoping they would not notice the additional charge. The scheme applies for both – retail stores and e-commerce websites.

SeqUR has an internal capability to view stores as merchandise providers from one hand and a potential risk on the other. Wearing those two different hats our algorithm modelizes the stores by various criteria – as a dimension of the customer (card number) or as the main entity when the customer is one of its dimensions. Two different point of view for the same purchasing transaction.