In recent years, the eCommerce industry has seen many positive changes. Not on the list: card-not-present (CNP) fraud.
According to a 2018 study, CNP fraud in the U.S. jumped from $3.4 billion in 2015 to $4.57 billion in 2016. During that same period, card-present fraud declined from $3.68 billion to $2.91 billion. Over time, this shift will only speed up.
The good news: online credit card fraud isn’t that hard to control. If you can identify specific red flags, you’ll be in a much better spot. None of these signs point to a problem by themselves, but they can support further investigation.
Want to make sure your business is safe from CC fraud? Here are 9 warning signs that will help you detect foul play.
1. High Order Values
Most fraudsters are running on borrowed time, as their stolen card can get canceled at any moment. This makes them more likely to try to maximize their profits. More often than not, this will lead to unusually high order values.
The other thing you should pay attention to is the expedited shipping. This option can be very steep and paying it rarely makes sense. If someone is paying $400 in shipping for a $200 product, take another look at the order.
2. Billing/Shipping Mismatch
There are many valid reasons a customer would have different billing and shipping addresses. For instance, they could buy a gift for someone else. They may have moved and haven’t changed the billing address yet.
Still, this is another potential indicator that something isn’t right. This is true if the addresses are in different states — or even countries! If you want to stay safe, contact the customer’s bank for more information.
3. High-Risk IP Address
Certain countries raise more red flags than others. The list of these countries can vary among studies, but a few offenders crop up repeatedly. Processing an order from one of them isn’t an end-all indicator, but it can be a cause for alarm.
Memorizing the high-risk locations is a fool’s errand. Instead, consider using one of the many credit card processing solutions out there. Most of them allow you to set your own permissions and will alert you to high-risk IPs.
4. Shady Email
If you’re suspecting someone for fraud, their email address can serve as a dead giveaway. For example, would an actual customer have an email such as rj2oh9p0k11@gmail.com? It’s possible, but the odds are against it.
Fraudsters prefer to use free email services (Gmail, Yahoo, etc.). Most of your customers use these addresses, but the first part is usually more readable. A business email is almost always a sign that the order is legitimate.
5. No Phone Number
If you don’t already ask your customers to provide a phone number, do so. This is one of the easiest ways to confirm someone’s identity. Fraudsters try to provide as little information as possible, so this can put a stop to many scams.
Once you have this practice in place, start checking any suspicious orders. If you don’t feel like it, keep in mind that fraudsters won’t want to talk to you either. Most of the time, they’ll type random numbers in the phone section.
6. Strange Billing/Shipping Address
Sometimes, you may come upon addresses that seem odd. The issues range from the zip code not matching the area code to the address not existing at all. This can be a typo, but it’s one of the more common signs of credit card fraud.
The best way to verify the billing/shipping address is to find it on Google Maps. Some fraud detection platforms even provide a Google Maps link under the address. If you end up in front of an abandoned house, cancel the order.
7. Proxy Orders
If the fraudster lives in a high-risk country, they may try to hide by using a proxy. Proxy servers allow users to hide their IP address and remain anonymous. Not everyone uses proxies for fraud, but that is a very common motive.
Unfortunately, many services provide clean proxies that businesses can’t identify. If the server drops the connection, all traffic will stop at once. The most you can do is keep an eye out for any orders placed with a proxy server.
8. No PayPal Verification
Does your business support PayPal as a payment method? If so, you may want to know whether a customer is a verified member. You can find that out by logging into your PayPal account and going through your History tab.
Verified members must go through a specific process to establish their identity. This often includes adding a real bank account. If a customer isn’t verified, check their reputation and the length of their PayPal membership.
9. IP/Shipping Mismatch
In eCommerce, an IP address serves the same purpose as a shipping address. They both tell you where the customer is shopping from, so they need to match. If the IP address points somewhere else, you may be dealing with a scam.
As we mentioned above, there are a few reasons these addresses may not match. Still, having a strange mix of locations is enough to raise an eyebrow. Pay close attention to IP addresses from New York and other big-name cities.
More on Online Credit Card Fraud
As you can see, there are plenty of ways to separate the wheat from the chaff. If you still have doubts, contact the customer.
Calling them serves two purposes: it verifies their phone number and gives you a chance to talk to them. If they pick up, ask a few questions to confirm their identity. If they ask why, present the call as part of your protocol.
As far as security measures go, getting a signature for expensive items can help as well. Never leave the packages at the door! Many fraudsters have the package shipped to a place where they can pick it up anonymously.
Want to know more about how to avoid online credit card fraud? Need some tips on starting a small business in 2020? Check out our Business section!
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