Credit Card Fraud Alert: 3 Ways To Protect Your Business

(By Mike Periu)

Implement software that detects potential fraud in real time. Numerous software solutions offered by companies like ThreatMatrix determine whether a specific transaction is legitimate or fraudulent in real time. These cloud-based solutions use up to the minute information as well as sophisticated and multifaceted detection methods to minimise the risk of scammers buying on your website.

According to comScore, the first quarter of 2013 saw retail e-commerce sales surpass $50 billion in the U.S., with 10 percent of all discretionary income being spent online. Last year global e-commerce surpassed $1 trillion. While this is great news for small businesses with e-commerce websites, the risk of loss also increases.

Cybersource, a payment and risk management services company, indicates that e-commerce losses due to fraud topped $3.5 billion last year. With nearly $10 million being lost to fraudulent transactions daily, small-business owners need to be especially vigilant, as a few bad sales could spoil your quarter or even your year.

Common Fraud

I recently met with one of the owners of a Miami-based welding supply company in business since 1981. The company launched a robust e-commerce website selling welding equipment and related consumables. Soon after the launch of the website, the owners were pleased when one of the first orders totaled over $4,000 in welding safety gear. The buyer paid online with a credit card. Such a transaction isn’t unusually large in the offline world, so the owners weren’t suspicious. The company packaged the merchandise and shipped it out to the buyer. That’s when everything started to go wrong.

Two days later, as part of a normal follow-up procedure, one of the partners called the phone number provided by the buyer to thank them for their transaction. Oddly, they couldn’t get someone on the line during normal business hours. After several attempts they decided to use the billing address to conduct a search and find an alternative telephone number online. When they searched the address, it turned out to be a residence, not a business. That started to raise their suspicions that something didn’t seem right. They then conducted a search on the shipping address. It also turned out to be a residence. Now the owners were getting really nervous. A small buyer could certainly have a residential billing address but it’s highly unlikely that they’ll also have a warehouse in their garage. The owners decided to dig a little deeper and discovered that the shipping address was a house that had been abandoned due to a foreclosure process. That was a red alert.

The owners realised at this point that they were the likely victims of a scam. The credit card was likely stolen and the cardholder hadn’t realised it yet. The shipping address was likely chosen because the scammer wouldn’t have to worry about a resident mistakenly taking the package into the house. They would simply patrol the area until the shipment arrived, take the boxes and disappear. The sellers would be left with a $4,000-plus loss. Immediately the company called its shipper in an attempt to cancel the delivery. They were disheartened to hear that the package had already been left on the front porch of the buyer. Explaining the situation to the shipper’s dispatch, they reached out to the driver who drove back to the delivery site and saw that the packages were untouched. He picked them up to return to the seller. The day was saved.

Protect Yourself

This type of situation will become more common as e-commerce consumes a larger share of retailer sales and scam artists become more sophisticated. You can protect yourself by implementing the following practices:

Implement manual confirmation procedures. Manual confirmation involves calling or emailing the buyer to make sure the transaction is authorized and legitimate. Choosing which transactions to confirm manually will depend on the nature of your business and e-commerce sales. Cybersource reports that nearly three out of four online retailers implement manual confirmation procedures for at least some of their transactions, but this percentage is falling.

Scammers are also aware of the typical parameters used (large transactions, foreign buyers, etc.) and work to avoid these red flags by lowering the average dollar value of fraudulent transactions and using domestic “drop” addresses like abandoned properties.

Implement software that detects potential fraud in real time. Numerous software solutions offered by companies like ThreatMatrix determine whether a specific transaction is legitimate or fraudulent in real time. These cloud-based solutions use up to the minute information as well as sophisticated and multifaceted detection methods to minimise the risk of scammers buying on your website.

Activate package recall services with your shipping company. Leading shipping companies have implemented recall services that can provide a last line of defense against fraud. Once activated, the services allow you to track your packages and at any point in the shipping process freeze delivery. Shipping companies usually charge a nominal fee—around $10—for each recall request. You have the option of having the shipper send the package to a different address, delay delivery or hold it at a distribution center.

(Source: Openforum)

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