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Internet Safety: How to Detect Internet Fraud in Your Business

Just like pesky telemarketer calls, internet schemes present a unique challenge of digital developments. As a business owner, it could make it difficult to spot a real customer, or you could face the fallback of an unauthorized transaction. Those charge-backs can cause financial loss to your business.

Credit card companies put pressure on online merchants to verify the identity of cardholders when they order. This means it is incumbent upon e-commerce business owners to know how to spot fraudulent transactions and take protective measures.

So, before these internet schemes have you seeking legal aid or losing business, know how to detect online fraud with these tips:

Utilize Address Verification Service

Address Verification Service, or AVS, is an automated fraud prevention program formulated to mitigate the risk of fraudulent transactions. The system compares the billing address supplied at checkout with the one on file with the issuing bank. If it detects a mismatch, the system can flag it as potential fraud since a fraudulent purchaser may not have access to all the personal information of the cardholder. While it does not necessarily mean it is fraudulent, the mismatch is a good indicator you should take the time to check for other risk factors in the order.

Note User Location

Secure transactions will be the ones where the billing address, shipping address, and IP address are all fairly close to each other. Transactions with long distances between listed addresses should be given a little extra attention. Use a system that can flag and identify these discrepancies. Again, it does not guarantee fraud, but it can be a flag used to draw your attention.

Track the Shipping Destination

On the same note, fraudulent purchasers will often ship products to an address other than the billing one. Different shipping and billing addresses are at a much higher fraud risk since fraudsters have to receive the goods somewhere. If the destination is a re-shipper or freight forwarding company, that is a huge red flag for a fraudulent purchase.

Beware IP Proxies

Fraudulent purchasers will often attempt to hide their IP address, preventing you from seeing where in the world they are placing their order from. There are technologies available to verify IP addresses’ legitimacy.

Check Emails for Reputable Domains

Email accounts are rather easy to create and throw away these days. Domains like Gmail and Yahoo are especially susceptible to this because they are free to make and use once. Emails from business domains are lower risk. There are third-party services that can provide data on an email account, determining if it is a Disposable Email Address (DEA) or reporting on account longevity.

Spot Patterns in Theft and Fraud

If you spot multiple failed purchases back-to-back with a variety of card numbers, you are very likely to be looking at a fraudulent transaction attempt. Once a fraudster has made it through once, they will try again. You can blacklist the email, phone, billing address, and IP address to ensure subsequent attempts fail.

The Bottom Line

Catching an internet schemer in the act is not simple. The most common way to catch a fraudster is through frontline employees in charge of processing orders who might spot irregularities. Share the tips here with your employees and strengthen your first line of defense.

You can also strengthen your protection with various third-party support systems and chargeback companies to identify vulnerabilities. No matter your business size or the method used, you need a fraud prevention strategy. The other option is learning the hard way — and we do not recommend that.

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