Combating Online Credit Card Fraud

The increased use of the internet as a marketing tool has resulted in the growth of a huge number of small businesses. Online businesses have created more convenience, and most of the small businesses are thriving well due to the availability of large customer base. However, the rise in the number of these businesses has created a bigger problem that business owners have to deal with. Credit fraud is one big issue that most of the small business owners don’t take the time to think about. While the big corporations invest huge chunks of money to protect their online businesses, small businesses don’t consider it as a priority. This creates avenues for hackers and other rogue individuals to exploit their vulnerabilities since these businesses are soft targets.

Credit card fraud can happen both online or offline. It is estimated that fraudulent credit card transactions cost small businesses in the U.S approximately $2.7 billion in 2010. This is a huge amount considering the cases have been skyrocketing in the recent past. So, how can online retailers reduce the cases of online credit card fraud that they see on their websites? Here are some tips for combating credit card fraud cases.


Ship to the billing address only

All the credit cards have billing addresses that are associated with them. Most of the scammers defraud businesses by pretending that they are purchasing gifts for individuals with a different address that is not the primary billing address. Although the business will lose on a few orders for genuine customers buying gifts for their friends, it will as well be missing out on some online fraudsters. This is essential to enhance the integrity and also to avoid paying for the chargeback costs as well as for the goods stolen.


Check the location of the IP address

Online fraud cases have become global. Establishing the geographical location of your online buyers can protect you as the merchant from the losses that we have highlighted. This can easily be achieved by establishing the exact location of the customer’s IP address. Genuine customers will always take the time to go through the authentication procedure to secure their personal information and to avoid being scammed as well. Be wary of individuals who make transactions with hidden IP addresses. Some regions are also known to be hot spots for spammers and hackers. They include Pakistan, Nigeria, Yugoslavia and Indonesia. Counterchecking orders from these locations will save your small business big time.


Compare the IP address and billing address location

Most of the spammers steal the identity of suspecting individuals from other countries and use them to defraud online businesses. If there is a disparity between the IP address location and the billing address, then it is important to cancel such orders. Another protective measure would be to block all the IP addresses from hot spot countries and other areas that you don’t offer shipping. One can also check the legitimacy of the customer’s location by use of tools such as Google maps.


Check the number of declined transactions

Another indicator of fraudulent activities is the increase in the number of declined transactions. Since fraudsters and scammers do guess work, they are likely to fail in several transactions before they get through. Limiting the number of declined transactions is one sure way to keep fraudsters at bay.


Watch out for anonymous email addresses and proxy servers

Some email addresses should trigger an outright alarm when they are used to make transactions. When you doubt the authenticity of any email addresses, it is then important to countercheck its legitimacy. Some spammers also hide behind anonymous proxy servers so as to conceal their identity. As a business owner, you should be wary before allowing such transactions to proceed.


Protect your website code

Most hackers nowadays use contact information to your website to inject malicious codes from which they can access classified information from your website. The standard firewalls and SSL encryption is not strong enough to prevent such hackers from penetrating your system. The websites protection should come from code within the websites application itself.
Tools for credit card fraud protection

Online fraud protection begins by use of protection tools such as credit card ID (CVV or CVC) and Address Verification system (AVS). AVS system is used to verify the identity of the person making the transaction by checking whether the address provided match with the billing address. CVV, on the other hand, is a four code digit found at the back of the credit card that merchants ask for in card-not-present transactions. AVS and CVV should be the starting point for any online business to reduce credit card fraud.
What to do when you notice suspicious activities

Once you notice fraudulent activities in your website, then it is time to take the necessary action. It would be important to contact the issuing bank to confirm the card details. It is also important to put the necessary measures to ensure all the online transactions are secured.

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