E-Commerce Beginners Guide: Identifying Fraudulent Transactions

As an Internet merchant, you will have to protect yourself from the fraudulent transactions as they are inevitable part of any Internet business. As a beginning Internet merchant, you should treat fraudulent transactions as an inevitable business risk that you accept as you enter the market. Realizing that, it is your responsibility to work on reduction of these risks and identification of the fraudulent transactions before they are processed.

Here are some tips on detection of the fraudulent transactions:

• check the transactions for liability shift; if the transaction is verified by Visa, customer will not be able to claim that he wasn't the one who processed the payment;
• check the customer's IP address. There are several IP address databases that provide IP to location service, i.e. it is possible to determine the customer's location basing on his IP. The majority of card processors record the IP addresses of the customers. If you see that location of the IP address is different from the billing address stated by the customer, you should pay more attention to verification of the transaction;
• check bulky or repetitive transactions via telephone. Telephone confirmations for suspicious transactions might become your most effective protection from credit card fraud;
• check your credit card processor's transactions history. Fraudulent credit cards are often declined by the processors. Thus if you see the attempt to place the same order with different credit card numbers and different cardholders, this is a clear indication of fraud.

Yet another problem for Internet businesses is an attempt of the customers to claim that goods or service were not received. It is easy to deal with this type of fraud if you deal with tangible products: customers normally sign the delivery receipt that testifies that the product was received. Many merchants, however, deal with intangible products. In such case, customers may always claim that they have not received the product or what they have received was not what they expected. There is no possibility to be 100% secure from such kind of fraud. It is very useful to develop some kind of mechanism where the customer signs electronic delivery receipt as he downloads the product. Merchant should keep the appropriate records easily available in case any dispute takes place. Whenever the chargeback dispute takes place, merchants must provide as much information testifying their faultlessness as possible.