If you are selling something on the
Internet, whether through product downloads or physical delivery, most likely
you are accepting payments through credit cards. Credit cards provide a
convenient way for buyers to pay, and thus form an integral component of doing
business online.
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However, you need to watch out for a number of things when accepting credit
card payments online. Just because a person expressed interest in your product
and placed an order, does not necessarily mean that the person is willing to pay
for it. They can use credit card fraud to steal it from you.
Credit card fraud has become pervasive on the Internet. According to
MasterCard International, account takeover fraud has increased by 369% since
1995. It has become one of the fastest growing types of fraud, and one of the
more difficult to combat. In 2000, Celent Communications estimate that U.S.
retailers alone lost an estimated $1 billion to online payment fraud.
Even if the credit card company has given you authorization as to the
validity of the card, there are several ways fraudulent cards can be used on
your site. The card may have been lost or stolen, but the card owner is yet to
report its loss. Or the number on the card (and not the card itself) may have
been lifted without the knowledge of the owner. There is also a scam called
identity theft, where the card has been issued under false pretenses using
someone else's identity and data.
As an online merchant, you need to have a system to check the veracity of
orders placed to safeguard your business. While the effort may require
additional time and money, it can save you the cost and stress caused by
charge-backs for fraudulent orders. Your product is gone; you lose the sale
price; and you will be fined an additional $10-$15 charge-back fee. If you have
a high percentage of charge-backs, your card services company can even cancel
your merchant account. You will also spend time looking up the order and provide
the requested information to your card services company. All of these hassles
are things you can surely do without.
How can you protect yourself from credit card frauds? Here are a few steps
that can be taken to ensure that the transaction is being requested by the
cardholder.
1. Subscribe to
checking systems (e.g. AVS) if offered by your merchant bank.
This
system checks whether the billing address given by the buyer matches the address
on file for that card with the credit company. While it may cost you more, it is
a powerful tool to help minimize losses due to credit card frauds. Note,
however, that the AVS system does not work with addresses outside the United
States.
2. Manually verify
the address.
If you do not
have the AVS system, check the address given by the buyer by going to any of the
mapping services available online (e.g. Yahoo Maps, Excite Maps). If the card is
stolen, the thief is unlikely to know the owner's address and will most likely
not provide his or her own address. Thus, there is a strong probability that the
buyer submitted a fictitious address. If the mapping services indicate that the
address does not exist, that should raise warning flags for you.
3. Call the cards'
bank.
An effective means of
verifying buyer information is to call the cards' bank, particularly for
questionable international orders. Call your card services company and request a
bank telephone number. Then, call the cards bank. In some countries such as
United States, Canada, China, India, etc., the bank will ask you to tell them
what information you have and then they will tell you "yes it matches"
or "no it does not". A few countries, however, such as Australia,
Scotland and the United Kingdom, have laws against providing any information,
including yes or no answers, to merchants.
4. Watch out for
the email addresses.
Be
careful of buyers that used e-mail addresses from free services such as Hotmail
and Yahoo Mail. These email addresses are very easy to obtain and people can
sign up for these services under a false name and made-up addresses. If used for
fraudulent orders, tracing these addresses can lead you to nothing. For orders
placed by a buyer with domain name e-mail, check out Internic's WhoIs service at
http://www.internic.net/whois.html to find out more about the customer.
5. Call the
cardholder.
If you have any
doubt that the person you are sending your merchandise to is not the cardholder,
the best thing to do it to call them. Ask to talk to the buyer, and explain that
you are confirming the address and contact numbers on the pretense that it might
be needed if there is any problem with the delivery.
6. Be cautious of
unusual bulk orders.
Before
you clap with glee upon receiving 100 orders of your product from an individual,
stop and think for a moment. Bulk orders are part of the normal transaction for
businesses, but not for a private individual. People out to con you will place
any number of quantity, since they do not intend to pay for the product anyway.
7. Shipping and
billing address should match.
In
business, it is normal to send the product to one address and the bill sent to
another. However, when dealing with individuals, insist on sending the product
only to the billing address, particularly if you are dealing with expensive
items.
If you are uncomfortable with the order, you can always cancel it or ask for
payment in advance. You can also opt to accept orders within your country if you
are not yet ready for international customers. It is always important to be
careful and ensure that you are not going to lose the money and the merchandise
in a charge-back.
About the Author:
Steve Ma. Reyna is a staff writer for
Power Homebiz Guides.
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