How to Protect Your Online Business from Fraud
For merchants who have decided to move ahead of the "brick and mortar" storefront, they have to realize that online fraud is a major threat that has reached enormous extent over the past few years. Although the Internet provides a great opportunity for online merchants to expand their business; it also exposes them to a greater risk of losses due to credit card fraud, if the orders are not being handled carefully.
As an online merchant, you have to take the risk of losing the cost of the product sold online, the additional cost of chargeback fees, and the possibility of having your merchant account terminated. The key is to keep your site up-to-date with the best security practices. Here are some steps you can take to minimize fraud.
1. Web site security.
Make sure your web site is equipped with security facilities like Secure Sockets Layer (SSL), encryption and firewall. This can ensure that your sensitive sales information and transmissions are safe from being accessed by outsiders.
In addition, you'll want to equip your order form with a CGI script, a web programming language which verifies the validity of the credit card number on the spot. Your payment system provider should provide you with a real-time processing. If not, you can hire a programmer to write the CGI script for you.
2. Order details
Collect as much customer information as you can, as this makes your job of detecting fraud orders and recovering lost money much easier. Make sure the customer filled out all of the information correctly and that it matches.
Convince your customers to provide accurate information upon ordering, especially contact information. If the customer provides a P.O. Box in a large city, always insist on a physical shipping address.
Don't forget to ensure that the customer is a valid cardholder. You can do this by checking the issuing country and billing address country are the same. Pay attention to countries which have high risk frauds, such as Nigeria, Ukraine, Indonesia, Malaysia, Yugoslavia, Lithuania, Egypt, Romania, Bulgaria, Turkey, Russia, Pakistan, Ghana, and Israel.
3. Free-mail addresses
It is common for fraudsters to try to cover their identities by using free-mail addresses. While most users of free-mail addresses are valid, caution should be exercised for orders with free-mail addresses, especially when this is the only way to contact the customers.
There is a much higher incidence of fraud coming from free email services than from paid service providers. You may want to consider not accepting any registration using a free web-based email services such as Yahoo, Hotmail and Gmail since they are virtually untraceable.
If an address makes you suspicious, go the ISP's (Internet Service Provider) web site and see if it offers free e-mail addresses. If the address is alex@scammer.com, just go to www.scammer.com to see if that web site is an email provider like Hotbot or Yahoo.
For every order received, you should send an email receipt to the email address given by the customer. The most important thing is you have to monitor bounced and returned email receipts. If the email is bounced, check the order carefully and follow up with phone calls.
4. Beware of out-of-norm orders
Take special caution of orders that fall outside normal ordering patterns. For example, beware of customers who order all sorts of items regardless of size, type, price, or color. Also, watch out for customers who order large purchases and then return later to buy more, especially around holiday seasons.
5. Use the Whois Lookup tool
This very useful tool is available at www.betterwhois.com. It tells you who owns the domain and where they are located. If a customer says he lives in New Zealand but the IP or email address is located in Singapore, be careful. Best of all, this tool is free.
7. Manually Reviewing Your Orders
Although this takes time, a little effort and precaution can be very beneficial. This works really well for small-sized merchants if they process less than 100 orders per day. Considering some of the questions below can help identifying the possible fraudulent orders:
Is the customer unwilling to provide a fixed line number? Does the address provided seem suspicious? Has the delivery address been used before with different customer details? Is ship-to address same as the billing address? Do you keep records of customer transactions?
8. Get a Fixed Line Number from the Customer - Both Home and Work
For security purpose, always insist on a fixed line number from your customers. If the order is new or suspicious, call the phone number provided to confirm the order details. This is one of the most effective techniques to verify a valid buyer. With VOIP services like SKYPE providing cheap voice calls today, there's no reason for you not to contact your customers to verify their details.
All the above methods in battling online fraud can be complicated when you're just starting out. It is important to note that online fraud cannot be eliminated completely, but the risks can be minimized. If you're worried about online fraud, a good resource is available at antifraud.com. This site is full of great tips to provide you with the knowledge you need.
As an online merchant, you have to take the risk of losing the cost of the product sold online, the additional cost of chargeback fees, and the possibility of having your merchant account terminated. The key is to keep your site up-to-date with the best security practices. Here are some steps you can take to minimize fraud.
1. Web site security.
Make sure your web site is equipped with security facilities like Secure Sockets Layer (SSL), encryption and firewall. This can ensure that your sensitive sales information and transmissions are safe from being accessed by outsiders.
In addition, you'll want to equip your order form with a CGI script, a web programming language which verifies the validity of the credit card number on the spot. Your payment system provider should provide you with a real-time processing. If not, you can hire a programmer to write the CGI script for you.
2. Order details
Collect as much customer information as you can, as this makes your job of detecting fraud orders and recovering lost money much easier. Make sure the customer filled out all of the information correctly and that it matches.
Convince your customers to provide accurate information upon ordering, especially contact information. If the customer provides a P.O. Box in a large city, always insist on a physical shipping address.
Don't forget to ensure that the customer is a valid cardholder. You can do this by checking the issuing country and billing address country are the same. Pay attention to countries which have high risk frauds, such as Nigeria, Ukraine, Indonesia, Malaysia, Yugoslavia, Lithuania, Egypt, Romania, Bulgaria, Turkey, Russia, Pakistan, Ghana, and Israel.
3. Free-mail addresses
It is common for fraudsters to try to cover their identities by using free-mail addresses. While most users of free-mail addresses are valid, caution should be exercised for orders with free-mail addresses, especially when this is the only way to contact the customers.
There is a much higher incidence of fraud coming from free email services than from paid service providers. You may want to consider not accepting any registration using a free web-based email services such as Yahoo, Hotmail and Gmail since they are virtually untraceable.
If an address makes you suspicious, go the ISP's (Internet Service Provider) web site and see if it offers free e-mail addresses. If the address is alex@scammer.com, just go to www.scammer.com to see if that web site is an email provider like Hotbot or Yahoo.
For every order received, you should send an email receipt to the email address given by the customer. The most important thing is you have to monitor bounced and returned email receipts. If the email is bounced, check the order carefully and follow up with phone calls.
4. Beware of out-of-norm orders
Take special caution of orders that fall outside normal ordering patterns. For example, beware of customers who order all sorts of items regardless of size, type, price, or color. Also, watch out for customers who order large purchases and then return later to buy more, especially around holiday seasons.
5. Use the Whois Lookup tool
This very useful tool is available at www.betterwhois.com. It tells you who owns the domain and where they are located. If a customer says he lives in New Zealand but the IP or email address is located in Singapore, be careful. Best of all, this tool is free.
7. Manually Reviewing Your Orders
Although this takes time, a little effort and precaution can be very beneficial. This works really well for small-sized merchants if they process less than 100 orders per day. Considering some of the questions below can help identifying the possible fraudulent orders:
Is the customer unwilling to provide a fixed line number? Does the address provided seem suspicious? Has the delivery address been used before with different customer details? Is ship-to address same as the billing address? Do you keep records of customer transactions?
8. Get a Fixed Line Number from the Customer - Both Home and Work
For security purpose, always insist on a fixed line number from your customers. If the order is new or suspicious, call the phone number provided to confirm the order details. This is one of the most effective techniques to verify a valid buyer. With VOIP services like SKYPE providing cheap voice calls today, there's no reason for you not to contact your customers to verify their details.
All the above methods in battling online fraud can be complicated when you're just starting out. It is important to note that online fraud cannot be eliminated completely, but the risks can be minimized. If you're worried about online fraud, a good resource is available at antifraud.com. This site is full of great tips to provide you with the knowledge you need.
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