How to Protect Your Business from Fraud
With identity theft at an all time high, it is crucial for online merchants to protect themselves from fraud. Learn how to detect signs of fraudulent activity and implement fraud prevention strategies to protect yourself from con artists. Early detection of fraudulent activity is crucial to the well-being of your business. Con artists shy away from preying on merchants with proactive fraud prevention tactics in place.
Protect your business by watching for signs of fraudulent activity. The most prevalent forms of suspicious activity include: orders for multiple high-end products, bulk orders for products that are rarely bought in large quantities, several orders placed by the same customer in a short period of time, international orders, and a large number of orders placed before you begin advertising.
Con artists try to obtain as much merchandise as possible within a short period of time. A credit card con artist will try to fit in as many orders as they can before the credit card owner notices that their card is missing. Con artists generally follow two strategies when placing fraudulent orders. They either order multiple big-ticket items in one order, or initiate multiple orders each containing one high-end product. Anytime that you run across unusually large orders, or bulk orders that contain a product that is generally not bought in large quantities, it is worth taking time to investigate the order.
Unfortunately, international orders are often a cause for concern. Foreign laws regarding fraud differ from U.S. law, which makes it difficult to recoup your losses. International orders warrant extra scrutiny, especially if an order contains a big-ticket item or multiple products.
A high volume of orders placed soon after opening your business may indicate fraudulent activity. Con artists prey on new online merchants, because they know that new merchants are often inexperienced. Defrauders find new merchants by obtaining lists of domains which were recently purchased. If you start receiving orders before implementing a marketing campaign, investigate the customers and orders placed to look for additional suspicious activity.
Use common sense to decrease the chance of loss through fraud. Any activity that raises a red flag should be investigated before shipping the order. Once an order is shipped, it is very difficult to regain your loss.
Payment fraud prevention should be your first line of defense against defrauders. There are techniques you can implement for each type of payment to avoid getting scammed.
Online merchants commonly accept one or more of the following forms of payment: credit cards, checks, money orders, and PayPal. The ubiquity of credit card fraud is daunting. Unfortunately, completely eliminating credit card fraud is impossible. However, there are strategies you can use to avoid accepting fraudulent credit card orders.
Verify all checks and money orders before shipping an order. Checks and money orders are both relatively easy to counterfeit or forge, especially when you consider that checks can be ordered through the mail. You can verify either form or payment by contacting the issuing bank on the check or money order. Many business owners choose not to accept checks or money orders, because of the high-rate of fraud on these forms of payment. If you do choose to accept them, always wait for the payment to clear the bank before shipping the customer’s order. That way, the most you will lose is your bank’s fee for non-sufficient funds.
PayPal offers sellers a measure of protection by informing them whether a customer is verified, and whether the customer has a confirmed shipping address. A verified customer has successfully completed PayPal’s identity verification process. The process varies for each country. In the U.S., a customer must link a valid checking account to their PayPal account. An address is confirmed once a customer enters some information in their account that PayPal sends them through the mail. This process establishes that the customer receives mail at the address on their account.
PayPal provides fraud protection to sellers who follow specific criteria. A seller must do three things to be covered by PayPal from fraud:
Anytime that suspicious activity surfaces, it is important to investigate the activity before shipping an order. Sometimes the signs will be obvious like the ones mentioned above, but other times you may just get a gut feeling. Follow your instincts and investigate situations that feel off.