Dealing with Order Fraud


There are so many issues in the ecommerce website world that you might be tempted to ignore those that don’t seem to apply to you. Unfortunately, order fraud is not an issue that you can sweep under the carpet. More and more people are shopping online, and some are doing this without the best of intentions. You need to understand how order fraud can happen as well as how you can protect your ecommerce website and your customers. 

Criminals are as smart as the rest of us, and they are always developing new ways of using new technology to their own advantage. The amount of online fraud, including order fraud, is rising every year. This does not just hurt customers and credit card companies; it can hurt you as well. If your ecommerce website exceeds its limits in chargebacks and refunds, your own credit and your ability to accept credit cards will be at risk. Here are a few ways that you can keep criminal behavior from ruining your business.

  • Identify and stop fraud before it happens. There are certain behaviors that should be a red flag that fraud may be occurring. If a customer is buying many of the same item (one that is not needed in bulk, such as a television), they may be trying to turn a stolen credit into cash by buying easily resold items. If the IP does not match the billing address, this is another red flag. Be especially way of cases in which there is an American billing address but a foreign shipping address. Set your system to red flag these orders for manual approval.
  • Verify information on suspicious orders. If you suspect credit card fraud, call the bank that issues the credit card and verify the address. You can also Google the address and telephone number that the customer gave you to see what comes up. Sometimes you can clear up misunderstandings by simply calling the customer. Most legitimate customers are pleased that you are being so vigilant in protecting them.
  • Use a Card Code Verification or Address Verification System. These both detect when there is a mismatch in the information that is given to you. Simply having these systems in place will send a lot of criminals elsewhere. This is not enough to prevent fraud on its own in all cases, however; you will need to have other checkpoints in place.
  • Hold off on shipping large rush orders. Most criminals committing online fraud have to do it fast, before the customer or the authorities catch on. For this reason, many fraudulent purchases involve large amounts of expensive items ordered with overnight or expedited shipping. If you encounter this pattern, call the person and tell them that there is a delay. You might be able to get a feeling of whether they are a real customer just from talking. A criminal may get spooked by the encounter and cancel it.
  • Don’t be afraid to cancel. It can be painful to cancel a really huge order, but it may be necessary if you are getting mixed signals or are otherwise unable to assure yourself that it is valid.

Don't Be A Victim – Avoiding Fraud

A lot has been written about avoiding internet fraud as a customer, but online merchants can become victims too. In fact, many internet thieves actually target e-commerce websites, especially smaller ones that may not be as hip to their potential as victims. Here are a few tips for protecting yourself from the crooks.

Use good site security. Having a secure payment pathway is not just important for the safety of your customers; it protects merchant information as well. You may want to choose a credit card processing service that offers protection against fraud because this will keep a smart criminal from compromising your company. On the other hand, you can get the same result with lower fees if you purchase an all-in-one e-commerce package that includes credit card processing with Secure Socket Layer Encryption as well as a system that verifies card authenticity and has rules for accepting or denying.

Be wary of foreign purchases. Many of the fraudulent purchases that we hear about come from foreign countries. This is usually due to the fact that it is harder to track down and punish crooks in other nations. One common scam is to buy an item with a fraudulent credit card and have it shipped to a foreign address. By the time the merchant finds out that they aren’t getting paid, the criminal has already taken the package and disappeared. To avoid this and other types of scam, you may want to hold foreign orders until you have received payment from the credit card company in question.

“Hey, big spender…” In many cases, people committing fraud will order large, easily liquidated goods and pay enormous shipping fees to get their goods before they are discovered. Big spenders can be a huge source of income, but you should also watch them carefully to ensure that the buyer is legit. Take the time to follow up on these purchases, because this can often stop fraud by showing that someone is watching.

Monitor orders with separate “ship-to” addresses. One big red flag that a fraud may be about to occur is that the billing address is different from the shipping address. There are legitimate reasons for the situation—sending a friend a gift, for example—but it can also mean that the buyer is using a stolen credit card. Some businesses will only allow shipping to the billing address, but this can cut back on sales. You will have to develop your own policy that prevents this situation without compromising your company. Sometimes all it takes is a phone call to determine whether you are dealing with a real customer or a crook.

Let common sense be your guide. If you have a bad feeling about an order, by all means, follow it up. Delay shipping until you have satisfied yourself that the purchase is legit. While any of the above situations will occur in online shopping, a combination of them—such as a large purchase on an American credit card that is to be shipped to a foreign country, for example—should be a huge red flag. Use common sense at all times to protect yourself and your customers.