The money being spent online is steadily growing. With billions of dollars being spent each year online, the opportunity to make money on the internet has never been bigger. Unfortunately, with that opportunity come people who want to make money in less than honest ways. We're going to look at some concrete ways you can identify fraudulent transactions and save yourself a lot of chargeback fees, money and grief.
Get more information from prospective customers.
The more information you have to work with, the better your chances are that you will be able to positively identify fraudulent transactions. At the very least, you need to make sure you get a customer's name, credit card billing address, phone number and the IP address of the computer currently accessing the order form. You should also get a valid email address. This email address should not be one that comes from a free email service.
Fraudulent transactions occur more frequently from certain countries.
The first thing you should know is that certain countries are more prone to fraudulent transactions than others. If you get an order originating from one of the following countries, you should be suspicious and do more digging. Some of these countries include: Ukraine, Indonesia, Yugoslavia, Lithuania, Egypt, Romania, Bulgaria, Turkey, Morocco, Vietnam, Russia, Pakistan, Malaysia, Nigeria, Israel, Iran, Cameroon, Gambia and Ghana. This does not mean that every transaction from any of these countries is strictly fraudulent. But you should be very suspicious.
Confirm the address of the customer.
The first thing I do when I get an online order is to check the phone number of the customer against a reverse phone number directory. The majority of my orders come from the United States and Canada. Phone numbers from these countries can usually be entered into reverse directories to find out the address that phone number belongs to. If I can not get a match for the phone number it servers as a red flag and warrants more investigation.
Lookup the customer's country and city of origin
I've already outlined a long list of countries that should be suspicious to you. How do you determine if your customer placed the order from within one of these banned countries? Simple. You cross reference their IP address with an IP lookup database that can tell you what country they are in. The city they are from and sometimes even ISP they use! If you handle only a few orders a day, you can use an excellent free service at IP2Location.com. If you do handle more volume, IP2Location.com also offers subscription packages at various prices.
Once you determine the country of origin, if it does not match the country the customer listed with their billing information be very careful. Yes, it is possible that your customer could be traveling away from home. It is much more likely that their credit card information has been stolen and it is being used fraudulently. A mismatch between the country reported by IP and the billing address is a big red flag.
Do not let customers use free email addresses.
A free email address is so easy to setup at most free email services. The odds of your being able to track down the person that registered that free email address are next to none. If at all possible, block all known free email services. The most common include Hotmail, Yahoo, Mail.com, and Gmail. If you can not block free email addresses in advance, consider a free email address a red flag. A utility you can use to determine if an email address is a known free email is dnsstuff.com. Look towards the bottom left of the page that comes up.
Do not ship a product until you are sure.
If two or more red flags go up, beware. If you ship a product from a fraudulent transaction, you will very likely be slapped with a chargeback from your credit card company and lose the money from the good. Be skeptical of all orders until everything checks out to your satisfaction. If in doubt, refund the purchase. Too many chargebacks will result in the cancellation of your merchant account. Who needs that?
A little diligence can go a long way to helping you prevent losses from fraudulent transactions. With a little knowledge, you can greatly reduce lost profits due to fraud.