Online businesses are worth almost as much as the entire financial sector in the UK with the total value of online trading being more than £100 billion. As businesses grow, these companies spend close to £3 billion per year in damages made by fraudsters. For online businesses, debit and credit card fraud are the main types of fraud they encounter. Criminals use cloned or stolen cards to buy goods online, or businesses ship goods and do not receive payment. However, businesses can reduce their expose to fraud by reviewing their transactions, identifying areas of risk, and taking action in those areas.
Credit Card Fraud
Card-not-present transactions have a greater risk of fraud than card-present transactions--the difference being customers are present to sign a receipt for the latter. However, online businesses can prevent credit card fraud in a number of ways. Fraud prevention is a vital task for any business because it can end up bearing the cost for these illegal transactions in the form of chargebacks. A number of merchant account providers offer fraud prevention and risk management services where they monitor transactions by:
- Verifying shipping and billing addresses
- Checking for known fraud with the address provided by the customer
- Screening for unusual buying patterns
- Checking IP addresses for cases of fraud
Some online businesses can also use Pre-Authorize/Capture methods of accepting credit cards online, which allows them time to screen their own transactions for fraud. With Pre-Authorize/Capture transactions, business owners can cancel the order before shipping out any goods.
Installing an SSL Certificate into your website is a great way to ensure secure transactions and lets your customers know that you're taking precautionary measures to keep them safe from credit card fraud. An SSL Certificate creates an encrypted connection between your customers' Web browser and your server, so any information communicated between you and your customers will remain safe. You can recognize websites that have an SSL Certificate by looking for a padlock--usually green (for working, red for not), and usually by the address bar.
SSL Certificates have two main benefits. It protects you from data theft and message forgery, and can increase your online sales by customers acknowledging your website is safe. Many online shoppers will look to another merchant if your site is not encrypted with an SSL Certificate. Customers want a site they can trust.
Additional fraud prevention techniques include storing all data in a password-protected area and logging all access to your website servers.
Red Flag Signs of Credit Card Fraud
There are a number of indicators that may make any business owner investigate a transaction before shipping out the goods. One red flag sign is a customer requesting to pay by check. Another is a customer who offers to pay more than the value of the transaction in return for you refunding the overpayment. Other red flag signs of credit card fraud include:
- Misspelled names
- Only offering a mobile phone number
- Unusually large orders
- Multiple transactions involving different cards
- A delivery address in a high risk country, such as Macedonia, the Ukraine, Indonesia, and Lithuania
Fraud Prevention Advice
Fraud prevention advice for online businesses are available from a number of sources. One of the first places to look is with your merchant account provider--the company will most likely have specialists who can provide advice on steps you should be taking. Your local police force can also help you through websites such as Action Fraud where merchants can read about corporate and consumer fraud. Lastly, you can contact businesses that specialize in fraud prevention services, and they'll review all areas of your business for fraud risks.
Oliver Ortiz works for Expert Market--a division of MVF Global. Expert Market is a UK-based provider of a wide variety of business related equipment and services. You can find Oliver on Twitter @OliOrtiz7 if you would like to talk to him.