Thread: Fraud in the eCommerce Industry

Hello everyone.

I just wrote up a new post regarding fraud in the ecommerce industry and how you can protect yourself from it. If you do any sort of sales online, this is an important article to read and remember - since it could end up saving you a lot of money somewhere down the line.

Preventing eCommerce Fraud

I also published two other relevant articles on
Boosting eCommerce Sales and Boosting Online Sales

Hey, I haven't link dropped in a long time, so bear with me.
Check out my posts and let me hear your thoughts.

Now, for the discussion topics:
If you run any ecommerce sites, how have sales been, considering the economy? Rising or falling?
Have you ever encountered any fraud or chargebacks?
How do you boost sales and prevent fraud?

Most frauds are stopped by Payment gateway providers.

Originally Posted by Natural Elements

Most frauds are stopped by Payment gateway providers.

Right. I cover that in the last point I touch upon in the post.

However, most is not all and many times fraud slips right past payment processors.
Just ask Will - he had a series of terrible encounters with TechFaq/TopBits related to fraud.

Good article, Kovich.

Originally Posted by Natural Elements

Most frauds are stopped by Payment gateway providers.

This is true, but when they slip through, the merchant is on the hook and may also have to pay a penalty on top of the money lost for shipping and the cost of the product. Most merchant accounts hit the merchant with a $25 or more fee on top of the chargeback for each fraudulent order.

A couple of things you should know. AVS is not foolproof. AVS only checks the billing street address and the zip code. They do not check delivery addresses. Some AVS systems only check the the street number and not the street name. You need to watch for AVS verification when you receive an order. I used Authorize.net (payment gateway) and Wells Fargo (merchant account) for one of my sites. Many orders that did not pass AVS still went through, sometimes with no explanation as to why it did not pass AVS. The orders were flagged, but they still went through. It was up to me to make the decision to accept or reject an order.

Even if the order passes AVS with flying colors, if it is a fraudulent order, the merchant still gets hit with a chargeback.

You always have to verify delivery addresses whenever you can. At Christmas time, about 5% of the people placing orders did not get their own street address correct. If the package goes to the wrong home, the merchant loses. I hold a lot of orders until the address can be verified.

As for the economy, my sales drop off of a cliff every time Obama gets on the television to tell us how well the economy is improving. I also run quite a few Amazon affiliate sites that normally do fairly well. The traffic is not down, but the sales are down dramatically. I don't see people buying things right now because they do not believe what the government and the liberal press it telling them.

Literally all of my friends who have e-commerce sites are reporting the same problems with sales.

I used Authorize.net (payment gateway), Wells Fargo (merchant account) and Bank of America (merchant account) still you can configure parameters in you payment gateway provider.

If you know a little bit more about the credit card processing, you will also know that there is different rates for different risks like processing credit card by telephone, POS, gateway provider online, etc

I ran for 2 years a merchant account and never had frauds with my online store, because the parameters were very selective.

Of course some merchants will have some different experiences, but I just told mine.

Like any security you can put, it is never 100% bulletproof.

Originally Posted by Natural Elements

Like any security you can put, it is never 100% bulletproof.

You can tighten it to the point that a lot of good orders get rejected. That's the trade-off.

What bothers me is how easy it is for someone to slip a fraudulent order through (especially with proximity fraud), and the merchant is still on the hook even when AVS gives the order a full pass. I tend to heavily scrutinize any order over $100 because of this.

Fortunately, I did win the only fraudulent charge I had to fight. It was a situation where a wife used hubby's card to buy him a gift and didn't tell him. He rejected the charge. I did get her to admit that she did this in an e-mail and the chargeback was reversed. I have seen friends who got chargebacks for similar scenarios that they did not win. Whenever there is a doubt, the credit card companies side with the consumer.

That's right and you have to be careful with that because if you have too many chargeback for fraud, you can loose your merchant account.