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How to Combat Fraud in your Online Business

By: Dave Howell - Updated: 22 Jul 2010 | comments*Discuss
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The fact that the vast majority of the transactions that will move through your online business will be cardholder not present means that your business may become the target of fraud. Fraud prevention should be one of your top priorities, as reducing the instances of fraud not only saves your business money, it also reinforces your reputation as a safe place to shop online. Your website may be the target for fraudsters, but you are not powerless to act.

Credit Cards

Your online business simply couldn’t function without the credit card system. But the Internet and your E-commerce website have become a target for credit card fraud that has in the past been difficult to detect and eradicated. Today, however, the card issuing companies have taken major steps forward in fraud prevention especially with card not present transactions.

The payment service provider you use should do all they can to help your business fight fraud. The security systems you put in place within your online business should include MasterCard’s Secure Code and Verified by Visa. In addition you can fight fraud by using AVS (Address Verification Service) and CSC (Card Security Code) for additional security protection against cardholder not present fraud. You may see these systems called 3D or Three Domain Secure.

Chargeback Protection

One of the issues of cardholder not present fraud is the high risk of chargebacks. Your online business may well have already shipped the goods, but payment hasn’t been credit to your account by the cardholder as they are disputing the payment. Some payment processing services offer chargeback protection services. Check what is on offer before setting up an account. This extra protection could come in very handy if your business becomes the victim of a credit card fraud.

Corporate Fraud

You business name could be used by fraudsters without your knowledge or permission. Contact Companies House for more information about this type of security threat. Register with Companies House to use PROOF at the Companies House website.

Fraud Prevention Checklist

To help your online business protect itself from fraud use the checklist below to help you improve security and develop robust security prevention polices:

Is the Customer Known to You?
As you operate your online business you will get to know your regular customers. If you spot an unusual transaction amount on one of their accounts, query this as their card may have been cloned.

High Value Goods
If your online business sells goods that are high value and easy to resell, your store could be a ready target for fraud. Be especially vigilant with new customers that place a large first order. Double-check their credentials before processing the order.

Delivery Address and Contact
The delivery address you are given can be verified with online services. Often, fraudsters will use an address as a drop where they pick-up the goods they have bought with a fraudulent payment. If in doubt check the address before shipping the goods.

Payment Providers
The company you use to process your payments should have high levels of security protecting their systems. Ask for an existing customer or two you can talk to about how they handle their fraud prevention.

Phishing Attacks
Email is increasingly being used by fraudster to get hold of the account details of consumers that can then be used to purchase goods. Put in place within your website a mechanism whereby customers can report any phishing attacks that mention your website. You can then follow these up with the police.

Card Provider Services
The credit card providers now do much more than in the past to combat fraud. Ensure your online business uses the security features that AVS (Address Verification Service) and CSC (Card Security Code) provide. In addition you should also use where possible MasterCard’s SecureCode and Verified by Visa.

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