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1 Jun 2017
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Avoiding Fraud When Accepting Online Payments

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Posted By Gordon R.

If you run an online business, fraud is one of your biggest fears. You lose money and products when fraudulent purchases are made, and sometimes it feels as though there is nothing you can do to fight it. While fraud is a very real problem, there are things you can do to fight if you do your homework beforehand.

Recognize Fraudulent Orders

While you may not be able to recognize all fraud, there are some clues to watch for. Look out for orders with the following characteristics:

Placed late at night Orders for huge volumes of merchandise Address that does not match credit card billing address ISP in a different area than the customer's address Email addresses from free email programs that are not assigned an ISP Repeat purchases using a credit card number with different expiration dates

Obviously, it would be impossible to block all attempts that had some of these characteristics, but if you can learn to identify them, you may be able to fight back.

Fighting Fraudulent Credit Card Purchases

When fighting fraud, you must look for a balance between fighting crooks and making it possible for people to make purchases without going through too many loopholes. Remember, requiring your customers to do too much to prove their identity may cause them to not make the purchase, thus lowering your profits. You will have to decide what steps to take, but consider these:

Require customers to provide full information, including phone numbers and billing address. Consider calling customers using the phone number they provide in order to verify their identity and the fact that they placed the order. If you do this right, the customer will not mind, because they will view it as an attempt to protect them from identity theft. Use a database to block credit card numbers that are identified as high-risk. Ask for the security number on the card. On MasterCard or Visa cards, this is on the back on the signature lines. It is on the front of American Express cards. Consider blocking customer who use free email programs. Keep in mind that this will hurt many legitimate sales, because millions of people use these as their primary email addresses. Ask customers to use an online payment gateway like PayPal that provides some protection from fraud. Delay delivery until the payment clears. Never offer cash or check refunds. Some scammers will make a credit card purchase on a fraudulent card, then immediately ask for a refund via check or cash. If refunds are required, put the money back on the card.

Go through this list, and put in place the protections you feel comfortable with. Remember, you may not be able to avoid all fraud, but with the right steps, you can prevent much of it, protecting yourself and your customers. When you do face fraud, remember that even the best traditional merchants occasionally deal with it, so fight the crook as well as you can, put extra security in place, and move on. There are more sales to be made and more money to earn!

Comments (4)

By Raquel K. on JUN 3 2017 @ 4:08PM

Unfortunately, this risk makes it hard to open up your businesses to possible customers in other countries.

By Xavier P. on JUN 3 2017 @ 2:21PM

Funny, I always worry about fraud when I'm making payments...but I guess it goes both ways.

By Nettie F. on JUN 3 2017 @ 6:13AM

That's why we have Paypal.

By Max O. on JUN 2 2017 @ 6:01PM

Is Bitcoin secure for vendors? I mean is there any chance that people could be paying you with fake Bitcoins that aren't actually real.

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