Don’t Let Your Ecommerce Business Become a Victim of Online Fraud

While the online fraud rate has remained steady over the last few years, the amount of total dollars lost by online businesses to fraudulent scams has increased. According to recent data collected, online merchants lost about $4 billion to fraud in 2008.The biggest reason why online businesses lost more money to fraudulent scams in 2008 than previous years is simply that riskier transactions were processed. In 2007 on average 4.2% of online orders placed were rejected due to suspicion of fraud. However, in 2008 an average of only 2.9% of transactions were rejected. With the average fraud rate remaining constant this meant that many more fraudulent transactions than the years prior were processed. CyberSource explains “Merchants had to accept more charges lest they turn away sales in tough economic times.”

The dangers of processing fraudulent transactions online range from losing money on the transactions themselves to being fined to lawsuits and even getting your ability to process transactions online revoked. So, what can you do to insure that your ecommerce business is not at risk to lose money?

  1. Make Sure Your Provider Is Compliant
    Your ecommerce provider should be PCI Compliant/CISP Certified. Do not just take your provider’s word that they are compliant. Check for yourself that they are on Visa’s independently maintained list.
  2. Secure Your Site
    Most merchant account providers (the provider that processes your credit card transactions) will require that you have an SSL (Secure Socket Layer) certificate, which encrypts all information that your customers enter on your site before sending it across the internet. If you do not have an SSL you can get one installed in just a few days. The two most common types of consumer SSLs are 64 bit and 128 bit encrypted. The 64 bit SSL will secure your customers’ data, but not nearly as well as the 128 bit variety. The 256 bit SSL is not a good value for the extra money because it is much more than a traditional ecommerce site would need- those are meant primarily for the government. We strongly recommend the 128 bit SSL for all online stores.
  3. Be Cautious When Processing Orders
    Before you charge a customer or ship a product you should make sure that the order looks legitimate. If you have any concerns you can try to contact the customer before you process the order or reject it altogether. Some things to look for that may signal that an order is fraudulent are the following:
  • Billing and shipping addresses that don’t match (especially if they are in different countries)
  • An IP address from an area different than the billing or shipping address
  • A different name on the credit card from the contact information provided
  • Multiple orders by the same individual (especially in a short period of time)
  • Previous declined orders by that individual
  • Large quantities of the same product included in the order (ex. 10 cellphones of the same model)
  • High order total compared to your average order size (if it seems too good to be true it probably is)

If you have any questions you can always contact your provider, or ask your peers.

-Kate Pierce eCommerce Specialist

3 Responses to “Don’t Let Your Ecommerce Business Become a Victim of Online Fraud”

  1. John commission blueprint

    nice article many fraud all around.

  2. Ecommerce Business

    […] Don’t Let Your Ecommerce Business Become a Victim of Online Fraud … […]

  3. J Eccles

    Don’t be shy about calling a customer to confirm the order. Most fraudulent orders will have either cell numbers or non existent number. Real customers will not mind the call – it means you are watching out for them too. Another good tool to use is reverse directories to confirm that addresses and phone numbers.


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