eCommerce - Preventing Fraud

Recently, Internet security issues such as credit card fraud and identity theft have received a lot of media attention.

 

While it's true that a degree of concern is warranted, it's safe to say that the media has blown the issue way out of proportion.

 

The current situation can be summed up stating:

 

a) The perceived threat of Internet fraud by the media and general public is much higher than the statistical reality of it

 

b) While there are some simple precautions you should take, most of them are basic common sense.

This is not to say that the Internet is bullet proof - it's not - but it's important to put things into perspective.

 

The reality is:

 

1. Billions of dollars are successfully processed online everyday, with only a tiny percentage being exposed to any form of fraud

2. The majority of fraud analysts believe online transactions are less dangerous than physical retail transactions

3. Visa International reports that online credit card transactions make up less than 2.5% of all credit card fraud.

 

Internet Security: Myth VS Reality

 

Myth: Online merchants are at a greater risk of fraud than retail merchants.

 

Reality: Research indicates that online merchants are at less risk than retail merchants.

This is because a large percentage of credit card fraud is actually caused by retail sales employees who handle card numbers.

 

When a sale is processed online, the risk of employee fraud is reduced because the credit card information is encrypted. This removes a major avenue for employees to store credit card information.

In a physical retail environment, staff can simply keep a carbon copy of the manual credit card swipe.

 

Myth: Consumers should be scared that 'cyber thieves' will steal their identity.

 

Reality: Statistics from 2004 reveal that over 72% of personal information thefts were done offline.

On top of that, 'cyber thieves' were found to only be a small part of the problem. 50% of all identity theft was found to be committed by friends, family members and neighbours.

 

5 Tips to Minimize the Risk of Fraud

 

Obviously it's in your own interest that the transactions you process are true and accurate.

Here are some basic precautions you can take to minimize the risk to your business:

 

1. Check for suspicious purchasing behaviour. If in doubt, call the customer to verify the order by asking for more information (e.g. fax of driver's license).

2. Ask for complete information on your order form including full address and phone number.

3. Only ship to physical addresses and not PO boxes.

4. Avoid dealing with countries that have a high fraud rate (e.g. Nigeria, Russia, Romania, Indonesia, Malaysia, Pakistan, etc).

5. Be cautious of suspicious orders originating from free web-based email addresses (e.g. hotmail, yahoo, etc). These throwaway email addresses are often used by fraudsters to prevent notifying the real customer of their actions.

 

Final Thoughts on Credit Card Fraud

 

The media has had a field day by scaring people into believing they're about to become the victim of 'cyber-crime'. While it's not exactly a fair and balanced view... unfortunately fear and controversy is what sells papers.

 

From a consumer perspective, credit cards remain the fastest and most convenient way to purchase goods and services online.

 

In the case of fraudulent transactions, consumers are protected by the terms and agreements set out by their credit card provider.

 

Most credit card policies indicate that cardholders are only responsible for a small amount (i.e. $50). Anything above this amount is covered by the card company.

 

At the end of the day, the best defense for merchants and consumers is exercising caution and applying basic common sense.