Business owners thinking of setting up shop on the Net should be aware of the risks involved in doing so. The real risk comes from the fact that on the Internet, the customer never signs for their purchase. Because of this, the banks view the transaction as MOTO (mail order/telephone order) or "card not present". This means that the emphasis is on the business owner to do the appropriate checks to validate whether the customer is genuine or not. According to the credit card companies' regulations, the merchant is 100 per cent responsible for any fraudulent transaction or charge-backs. This means they may incur high costs due to stolen merchandise and could waste many valuable hours trying to detect fraud.
What is a charge-back?
Say I am a cyber thief and I use my computer to randomly generate credit card numbers. One of these numbers happens to be your credit card number. I use the randomly generated number to make a purchase at Woolworths.com.au. I put in my delivery address and the goods get shippedto my home. A month later, you receive your credit card statement and see that $200-worth of groceries have been purchased at Woolworths. Annoyed, you try and blame it on your wife/husband only to find out they did not make the purchase. You call up your bank and charge the purchase back to the business. This is known as a charge-back. In this case, Woolworths.com.au will have to wear the cost of the fraudulent transaction fairly on the chin.
Who's doing it?
The scope of cyber thieves extends from experienced computer hackers to kids as young as 12 who are looking for a bit of fun. With the right software, anyone can use their computer to generate stolen credit card numbers. Once these numbers have been created, they can be used over and over again to pilfer from an endless number of sites. Similarly, with a little clever thinking, a cyber thief can con hundreds of Internet users into giving up their credit card details, which can then be used to make fraudulent purchases.
What can you do to protect your business against cyber fraud?
Fraud-checking software - Fraud detection software uses various user-defined fields to detect occurrences where fraud is likely. Companies such as HNC (www.hnc.com) and CyberSource (www.cybersource.com) are seen as leaders in the fraud-checking software field.
Address verification - Unfortunately address verification is not available outside the US. In the US, the credit card number is linked to a particular address. Address verification checks the address entered by the customer against the address link to the card. If the address is different to the address that is linked to the credit card, then the transaction may be declined.
Fraud insurance - Is a good way of protecting your business against any losses suffered due to cyberfraud. It does not reduce the incidence of fraud, but in the event that your business is plagued by fraud then you will be covered against any losses. Pure Commerce can provide you with an insurance policy underwritten by Chubb Insurance.
Amanda Mason is the PR and marketing manager for Pure Commerce. Reach her at firstname.lastname@example.org