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What Every Merchant Should Know About Internet Fraud
Internet fraud is more prevalent than "brick and mortar" fraud and much more
difficult to detect. Off-line merchants can see who they are doing business
with, look at their credit card and watch them sign the receipt. In the online
world however, customers are virtual and never sign a paper receipt, so
authentication becomes a challenge.
Because of this, online transaction fraud is 17 times higher than in-store
fraud, according to Gartner Group estimates. In 2003, online transaction fraud
reached $1.8 billion. These figures don't include the cost of additional labor
and fees associated with fraud investigations and merchant fines.
The threat of online fraud is so pervasive that the government has begun
mandating security requirements for businesses that handle financial information
online. Today these regulations apply mainly to the banking community, but as an
Internet merchant you access the financial networks for each transaction made on
your site. Because of this, security at the point of sale is becoming an
increasing concern for both credit card associations and the government.
Protecting Your Business Against Fraud
In spite of the growing threat fraud represents to merchants, there are ways to
significantly reduce your exposure to fraud.
Ensure that each transaction you accept and process is a valid transaction. You
should also be careful not to deny suspicious transactions that are actually
valid. Validation at the transaction level includes:
• Authenticating buyers when possible. This includes understanding who your
repeat customers are. Keeping lists of repeat customers who have legitimately
transacted at your site is important not only for fraud control, but also for
understanding purchasing patterns and building customer loyalty. Make sure all
customer information is encrypted and stored safely.
• Screening order content for fraud patterns. There is a wealth of information
associated with each transaction that can help you understand the risk level.
Activate the address verification service and card security code features. Also,
keep a list of information associated with "bad" or fraudulent orders and check
transactions against them. Similar to your list of "good" or repeat customers,
bad lists help you streamline the checkout process.
• Reviewing suspicious transactions. Finally, review each transaction that is
suspicious to make sure you are doing business with a legitimate customer.
Effective screening is essential to ensure that you have all the information
necessary to make decisions regarding questionable customer orders before they
are fulfilled.
Fraud prevention is the first step in ensuring the success and profitability of
your online business.
If you would like to learn more about e-commerce security and fraud protection,
contact WebsiteDesigner.Com at 401-454-1487 for a free consultation.
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