What can a merchant do to fight online credit card fraud?

The switchover to EMV chip cards has taken a bite out of in store credit card fraud. In some cases in store fraud has been reduced by nearly 75% in some European countries. While that is certainly encouraging and cause for celebration (though the job is not done yet) there still remains one medium where the chip does nothing to prevent fraud.

E-commerce has changed the way we do business. Anyone, from a small one person company to a large multinational conglomerate can sell their wares online. It has allowed mom-and-pop stores to compete with the Wal-Marts of the world and to reach audiences that were not imaginable twenty years ago. E-commerce also brings with it is own type of credit card fraud.

Typically there are two types of fraud. The first is an account takeover. A criminal gains access to an account by using stolen login credentials and then if a credit card is stored with a site going on a spending spree with the victim’s money until they notice. Typically any of the victim’s contact information is changed so that the victim remains in the dark. The second type of fraud is chargeback fraud. A chargeback is issued when the credit card holder disputes a charge after the item has arrived gaining them both the item and the returned payment.

So what can you, an e-commerce merchant do to combat this? After all you can’t check a signature or ID. One thing that can be done is to make any potential buyer enter as much detailed information as possible like a phone number, email address or billing address and making sure that matches the shipping address. If suspicious use an electronic identity verification (eIDV) service to confirm that the person is who they say they are. These services scour public records to match a potential customer’s information and help reduce fraud. Be suspicious of anyone making a large purchase the first time that they use your site, especially if high-value or easily resellable items are being purchased. Be especially wary if they request one day shipping. If everything checks out following the sale send a confirmation email. A bounceback could be the sign that a scammer is at work.

If a longtime customer suddenly begins buying something out of character or their information suddenly changes it may be a good idea to contact them and make sure they really are buying whatever it is that they want. Also be suspicious if someone is trying to split the order over multiple cards. That is usually a sign of stolen cards. Criminals also like to use PO Boxes. After all putting their real address would only lead the authorities right to their doorstep should they be caught. Be wary when shipping to a PO Box. Many merchants simply do not do it to begin with.

Another thing to consider is placing controls on transactions like how much a newly signed up customer can purchase. If a fraudster cannot get the items that they want right off the bat and may have to wait and make smaller purchases they may be dissuaded from using you to perpetuate a crime. It also allows time for the hopefully vigilant victim to discover what happened and put a stop to it. It would also be a good idea to keep track of all fraud that occurs and as much information about it as you can. You never know, the criminals might try again.

For anything above there is also a perfectly legal reason it could happen but knowing what the warning signs are can help a vigilant merchant not only fight cyber crime but save your business money and hassle at the same time. If you are ever suspicious call the customer to confirm an order. With credit card fraud being rampant they will understand.