Credit Card Fraud Detection for Online Transactions

"Credit card fraud - Alive & Well in Australia"

Unfortunately credit card fraud is a fact-of-life for all merchants who accept credit card payments as part of their business operation. With the increasing transition to online merchandising via the Internet, online credit card fraud is a serious issue. A business requires a sound order-confirmation-system if you want to avoid getting 'ripped-off', being subject to bank 'charge-backs' and/or constantly arranging refunds for fraudulent transactions.

Fortunately there is a simple 1-2-3 Step process that will almost guarantee you of success in avoiding being the victim of online credit card fraud. In almost a decade of accepting credit cards online, our company has avoided falling prey to the credit card scammers (even though we average 2 - 10 fraudulent attempts per month).

Our Method of avoiding online credit card fraud

1. Confirm ALL orders via email, and request telephone and street address details
2. Do not accept transactions from web-based email addresses, eg. Hotmail, Yahoo, Gmail, etc. press your 'customer' for their ISP email account, eg. name@bigpond.com, name@ozemail.com.au, etc.
3. Contact your bank's merchant support people if you have the slightest doubt about a transaction, they are there to help you and would much rather have you seek their assistance prior to your initiating a 'mini-disaster'.

Australian credit card fraud statistics
The following information is taken from the Australian Institute of Criminology and summarises credit card fraud cases reported in 2003 and refers to ALL credit card fraud, not just online transactions (more info from AIC). As you will see below, less than half of credit card merchants even bother to do any verification.



Manual fraud prevention techiques, similar to our 3 Step Plan above, are VERY effective, but you must apply them to all transactions that are not from a trusted customer. Manual screening of orders prior to sending the goods can save you aggravation, financial loss, etc.

Things to be suspicious of
Some major 'warning signs' to be aware of are...

• overseas orders from new sources
• postal box address for shipping of goods
• a billing address that is different from the shipping address
• free web-based email addresses
• mobile phone numbers instead of a landline telephone
• orders from African nations and Eastern Europe
• orders comprising large numbers of duplicate items (they may be sold on)
• orders with any 'urgency conditions' eg. "Must be shipped with 24 hours..."
  (intended to have you ship a large, expensive order without confirmation)

The last resort!
If you are still uneasy about a particular online credit card order, simply advise the client to make payment by any of the following means:

• visiting a bank and physically arranging a standard bank transfer
  (for an overseas order, you will need to obtain your banks 'SWIFT' number)
• deposit money via an Internet banking transfer
• pay by Money Order within Australia
• a bank cheque from an Australian customer
• a personal cheque (make sure you wait until clearance before sending the goods)
• pay by a Western Union money transfer for overseas customers

The advantage of these payment methods is a guarantee that you will not be subject to a bank or credit card company doing a charge-back and reclaiming the money. Should a customer query your reason for not accepting the credit card supplied, just say very nicely that your company has been advised to adopt this policy due the the high incidence of credit card fraud (blame your bank, accountant, solicitor, whomever... ;-)

Please feel free to contact the writer should you require additional information on any aspect of doing business online:
Contact: John Crago
Telephone: 1800 108 122
Mobile: 0428 324 804
Skype ID: johncrago