Fraud is a fact for any business, but it is an even bigger problem for online companies. According to an article published on MSNBC, credit card fraud is increasing with a loss of $6 billion a year. While businesses are also more aware of the problem and are taking precautions, scam artists are also getting more advanced in their techniques.
So, how can ecommerce businesses fight fraud and reduce losses associated with fraudulent purchases? Here are some tips to help prevent credit card fraud before it happens.
- If you have concerns about a purchase, call the credit card authorization hotline to find out more about the issuing bank and any credit card information.
- Verify online orders through AVS, an address verification service. This will allow you to know if the address you are given for billing is the same as what the credit card company has on file.
You can also find a number of tools with various pricing so that all businesses can afford these resources to help prevent fraud. For instance, device fingerprinting allows you to find out if someone is using multiple accounts and placing multiple orders from one computer.
Website behavior analysis is useful in the fact that it analyzes how someone is navigating your website. It is based on the fact that a person committing fraud is going to behave differently than someone making a legitimate purchase. An example would be someone who puts eight items in the cart in just a couple of seconds. A real shopper would take longer to look at their purchases.
Friendly fraud is a term given to customers who make legitimate purchases on their credit cards and then request a refund for no apparent reason. They may say they did not receive the item or that they were not the ones who made the purchase. Its usually card that is use by a family member without authorization.
To prevent this from happening, online merchants can get involved in payer authentication. This works for friendly fraud the same as for traditional fraud. A password is required which then proves that the customer made the purchase. There are even more complex services that can verify IP Addresses as well as other purchasing patterns (they check against their vast shared database) for the cardholders, it there is an anomaly or doesn’t match up, these are tag for review on your system, before you process your orders. While the customer can still commit friendly fraud, the merchant is no longer responsible; the problem falls to the issuing bank.
You can also protect your business when you ship the product by requiring a signature on delivery. Other things you can do to reduce this issue include:
- Only ship to the billing address on the credit card
- Use a shipper that provides shipping
- Use a shipper that requires signature upon delivery
CVV2 is an additional tool that businesses are using for online transactions. This requires the customer to give the code from the back of the credit card to complete their purchase instead of just the credit card number. This is used in transactions where the actual card cannot be presented to the seller. It can help a merchant win a dispute against a customer who attempts friendly fraud.
When you receive a charge back inquiry or letter from your bank, be sure to attend to it immediately. Don’t let it fester, there is usually an additional fee around $35- $50.00 levied against the merchant, if you win the charge back fight, you won’t be access this fee.
Ecommerce businesses must take precautions to protect themselves from fraud by either the customer or someone else. Many tools and resources are available to assist companies in identifying the actual purchaser to ensure that they are legitimate.