- Face the facts.
The fact in this case is that - YOU are at risk of losing ALL your profit and even more when you are selling online, especially to an International audience. Anything can happen and you could lose thousands of dollars in one clean sweep.
All it takes is for a credit card thief to use a 'valid' credit card to buy goods worth several thousands of dollars from your website, and repeat it again and again and again.
Within a very short time, you will not only have lost so much money but will end up paying huge amounts in chargeback fees when the 'real' credit card owner finds out.
So, it will pay you to educate yourself on the dangers as well as the 'advantages' of selling online. Know what you are up against and how best to reduce your risks online.
- Put warnings all over your website.
It is important for you to put warning signs on your website to deter credit card thieves from using stolen cards on your website.
State BOLDLY on your website that you have measures in place against fraud and will prosecute fraudsters to the full extent of the law.
Such warnings (even if not necessarily backed by facts) will make most of them scared because they will have the feeling that you know about them and are prepared for them.
Many will not waste their time on your site but find other sites, among the hundreds of millions others, to use their stolen credit cards on.
Such warnings you can put can include:
- This website is logging your I.P. address.
- This website is using an AVS (Address Verificaton System)
- This website doesn't accept credit card others from 'high-risk' countries
- This website only accept orders from ISP (e.g. @aol.com) or domain name e-mails addresses.
- For check orders, we MUST allow your check to clear before making shipment.
- Your shipping address much match with billing information,
- ETC
- Tell customers what will appear on their Credit Card Billing Statement.
Some of the reasons for chargebacks apart from fraud involve the credit card owner not remembering ever making an order from certain companies.
This could be a result of the company details not appearing on the Billing Statement of the customer.
To solve this problem, always include on your website the information that will appear on the Billing Statement of the credit card owner so that they will know what to expect when their Billing Statement comes out.
This is especially very important if the name of your payment service is different from the name of your company or website.
So, if you use a 3rd party processor, and even if you don't, make sure the customer knows what name will appear on their Billing Statement at the end of the month.
- Use Address Verification System- (AVS).
Make sure that the processing equipment or software provided by your merchant provider supports
AVS.
AVS is a computerised system that automatically compares the statement billing
address on file with the credit card issuer with a customer's billing address provided with each order.
In other words, it checks to ensure the address entered on the order form matches the address to where the cardholder's billing statements are mailed to. AVS helps to give added assurance that the customer is the real owner of the credit card in question.
The few limitations of AVS are:
- It only works for addresses in the U.S.
- Cannot work with digital products.
- Smart thieves can still provide the real address on the credit card and provide a different shipping address.
- It is very expensive to set up. So even if you don't have an AVS, say you do on your website as a warning to fraudsters.
- Make sure the shipping address and the billing address match.
In other words, make sure that the "ship to" address matches with the "bill to" address on the credit card. This gives you full assurance that the credit card is not stolen.
But there could be instances when the real credit card holder might want to buy the product for someone else and wants the product shipped directly to such a person.
The best thing to do in such cases is to call the credit card holder on phone or even the credit card company directly to confirm if it is indeed a legitimate order.
- Log IP addresses.
An IP address is a unique network identifier issued by an Internet Service Provider to a user every time they are logged on to the Internet.
So, if someone is accessing your website from, say Nigeria, your log analysis will tell you from reading the IP address that the order is from Nigeria.
To make this more efficient, you can include a Time Stamp on each submitted web site order form. This will help you review all the orders you have received before shipping the items.
While most commercially hosted domains will have a server log running, there are dozens of website traffic tracking utilities available now all over the Internet.
These website traffic tracking utilities will not only return very valuable demographic data, but can also assist you in pinpointing the origins of all those accessing your website and those placing orders for you products.
- Collect CVC2 and CVV2 Verification Numbers.
This is an anti fraud feature designed to prove that the person placing the order is in fact in possession of the card.
It is a 3 digit number for major cards except for American Express where it is 4 digits. It is located on the back of the credit card (the last three digits, after the account number).
According to Visa, this tactic alone can reduce the cases of chargebacks by 26%. This is because by requiring customers to provide the CVV2 number, you have fairly high assurance that the buyer is holding the physical card and actually making the order in question.
- Use tracking codes in your order forms.
The various form handlers like FormMail, cgimail, etc have this facility in place which allows you to add a hidden field called the Environment Report field in your order forms.
This hiddden field will then serve as a tracking device for you. As the order pulls through, it allows you to know about the computer used to send the order, including the domain name and the IP address.
This knowledge can then help you whenever any problem arises with the order. Since you will then know the IP address and other information about the customer, you can contact the ISP if any fraud arises.
- Use Interactive Voice Response (IVR) Terminals.
This is a new technology that works by collecting a "voice stamp" or voice authorization and verification from the customer before the online merchant ships the order.
The voice recorded order verification is then automatically e-mailed to the merchant for filing in the event the customer tries to dispute the charge on their account.
This will help you to greatly reduce cases of chargebacks because the customer cannot deny the voice. Though expensive, it is important for you to use this solution when you are selling highly expensive items on your website.
- Use Out-of-band verification.
"Out-of-band" verification is a procedure of verifying the authenticity of the buyer outside of the Internet. When you receive an order on the Internet you can use this system to find out other information from the customer using other means other than the Internet.
For example, technology now makes it possible to place a real-time, automated phone call to the customer while they are shopping on your site, asking them to enter the confirmation code appearing on their screen.
If they respond, this gives you great assurance that they are authentic, but if not, you know that something is wrong.
- Be wary of orders coming from free e-mail addresses.
Since the objective of most credit card thieves is to defraud you, they will always want to avoid detection. They therefore hide behind addresses that cannot be traced back to them.
Such addresses include free e-mail addresses. They NEVER use real email addresses in these frauds because they can easily be traced.
There are thousands of free e-mail service providers all over the Internet. The quickest way for you to know if the order is from a free e-mail type in the word after the @ sign and before the .com in your address bar to check it out.
For example, if you receive an email from john@DomainName.com, simply type in www.DomainName.com in your address bar to check if it is a free e-mail provider.
If it is, carry out other checks before you ship the order. This is because not everyone using a free e-mail address is a credit card thief. If other requirements are met by the customer, you can go ahead and ship the order.
You can find a detailed list of free e-mail domains on the AntiFraud website.
- Check out the domain name.
For those customers who have websites, you can check out their domain name information to verify if the address and name they used on the credit card matches with that on the domain registration.
To do this, use Network Solutions' database to search for the records.
But note that even if the addresses do not match, it is not a total sign of fraud, except in cases where you have completely different countries on both the domain and credit card.
You can take this further by actually visiting the website of the customer- following the domain of the e-mail address. On the website you will be able to judge if indeed the customer is genuine.
If you find out an 'under-construction' sign or a suspicious looking website, this should warn you that the owner might not be genuine.
- Be careful of overseas orders from 'high-risk' countries.
According to a recent study, as reported by MSNBC, more than 40 percent of all credit card fraud suffered by U.S. companies online is committed by overseas crooks, with orders from about 10 'high-risk countries'
Nigeria is number three in the list of such 'high-risk' countries after Indonesia and is followed closely by most of the Eastern European countries.
Below are some of the major 'high-risk' countries in order of notoriety:
- Indonesia
- Romania
- Nigeria
- Ukraine
- Yugoslavia
Lithuania
- Egypt
- Bulgaria
- Turkey
- Russia
This list is by no means exhaustive, but the above involve the most reported cases of credit card fraud.
However, this list nonetheless, there are still many people based in such 'high-risk' countries that DO have genuine credit cards with which to shop online. They could be in such countries on a trip and just need to make payments online.
And there are also other honest people in such countries that really asked their friends and relatives in the West to use their genuine credit cards to make purchases for them and have the items shipped to them in such countries.
This fact nonetheless, you should not ignore such countries completely. And with a country like Nigeria having a population of over 120 million, it will not be wise to just ignore the whole country just because of a few bad eggs in their midst.
What you should do in this case is to carry out other extra measures to verify the authenticity of the order.
If the other information provided is correct and the credit card is genuine, you can go ahead and make the shipment (via any of the private couriers- to be certain that the customer receives the order).
- Provide alternative means of payment.
To still sell to honest people in such 'high-risk' countries like Nigeria, you can include in your website that for orders coming from such 'high-risk' countries they should use other means of payment.
Such alternative means of payment can include sending an International check.
Note that even when you do receive the check, make sure the check finally clears at your bank before you ship the products. It should take about 2-4 weeks for an International check to clear.
Or you can demand for a Telegraphic Transfer to your bank account. This, though more expensive for the customer, takes just a few days to get to you.
And after receiving your payment, make sure you don't send the product by regular mail. The customer can complain of not receiving the product.
The best way is by sending it through either FedEx, UPS, DHL or the other known courier services. This way you will be sure that the customer receives the product.
Other alternative means of payment include:
- BPAY
- EFT (Electronic Funds Transfer via the customers Internet Banking)
- Pay Pal (used by millions of buyers and sellers worldwide, preferred method of sending and receiving payment on eBAY)
- COD.
- Be extra careful with large and expensive orders
Watch out for large or expensive orders. Don't get carried away because you have just received an order for 10 laptops or a $15,000 Rolex from a first time customer.
Such orders should put you at alert. Make sure you are on guard and use all the above safety measures to verify the authenticity of such an order.
Stolen credit cards have very short life span. The thieves therefore want to make the maximum use of the card in the minimum time allowed before the real owner finds out about the theft.
- Beware of 'rush' or overnight orders.
Watch out for orders from customers that seem to be in a 'rush'. Such 'rush' shows that something is amiss and the thieve wants the item(s) as fast as possible.
For example, if you receive an order that wants overnight delivery, be cautious, especially if the order is huge.
Like I have said, credit card thieves are always in a hurry to spend as much money from the card as possible before the real owners report the theft.
- Ask the customer to fax photo of the credit card.
For suspicious orders you can simply ask the customer to fax you the photo of the credit card or the photocopy of the credit card billing information.
This will help you confirm that the credit card owner is the actual person making the order.
- When in doubt, call the customer on phone.
When you still have serious doubts about a particular order, spend the extra time and money to call the customer in question using the phone number supplied in the order.
Also, you can call the credit card company and ask them to verify the credit card information to see whether the credit card has been reported missing.
This extra time in making this phone call can save you thousands of dollars that you would have otherwise lose to fraud.
More so, the customer will appreciate the fact that you seem to be taking good care of your business.
- Have the customers sign for expensive packages.
Using private courier services like FedEx, UPS, DHL, etc helps you to greatly reduce cases of frauds and chargebacks. With such services, you will be able to get your customers to first sign up before receiving their packages.
Even when they are not available at home or office, the courier will not drop the package 'at the door' unlike the public courier services.
This will help you in cases of chargebacks because you will have evidence that the credit card holder actually received the product.
- Document as much information about your contacts as possible.
To give yourself greater protection and a bigger fighting chance against the consumers, document all contacts you have with them. In particular, you should use caller ID, a voice mail box and keep all emails to show as proof in fighting your case.
Merchants keep losing money to chargebacks because of the futility of winning most cases, but with adequate information you can win a chargeback case.
- Use common sense to carefully review suspicious orders.
Whenever you receive an order that appears suspicious, use common sense and take extra time to review the order carefully.
