When you are an ecommerce merchant, credit card fraud is a serious concern. What most people may not know is the reason it is such a high concern to the merchant is because the burden of fraud falls on them. While it is great that the credit card banks, Visa, and Master Card protect the card holders from the fraud and limit the responsibility of the card holder to virtually nothing, they force merchants to pay for the cost of fraudulent transactions. Not only does the merchant lose the merchandise and shipping involved in sending out an order, but they are also charged a fee by the banks when the charge is disputed by the card holder. Therefore, preventing fraud and knowing what to look for is imperative for merchants. Unfortunately, contacting your merchant bank does not always yield a helpful result, so get educated about detecting fraudulent orders on your own.

Here are 5 tips to help stop fraudulent orders from being shipped:

1. Check for an Address Verification Match

Fortunately, the credit card companies do offer a few tools for checking the validity of credit cards, which can help offer clues as to whether or not an order is fraudulent. However, each tool is not a fool-proof way of pinpointing or ruling out fraud. In the case of the AVS (Address Verification System), this only works for the billing address of the credit card, which is the address that the credit card bill is mailed to, or is on file as the billing address for that card holder. In many cases, the shipping address is different than the billing address and this is a common occurrence in both legitimate and fraudulent orders. So checking the AVS codes with your credit card processor offers one clue about the order and is just a piece of the puzzle you have to put together to determine the validity of an order.

2. Check for a Security Code Match

The security code is called a CID or CVV code and is the 3 digits that are printed on the back of Visa and Mastercards, or is the 4 digits printed on the front of American Express Cards. Although this is another tool provided by the credit cards, unfortunately it also does not provide conclusive evidence as to whether an order is fraudulent or legitimate. If a credit card is stolen, then the thieves also have the security code, so the order could be fraudulent even if the security code comes through as a match. Then there are many cases where the card holder is trying to place a legitimate order, but the security code digits are often easily rubbed off in a wallet or hard to read.

3. Search the Name and Address Online

You will be surprised what you find when you search the customer’s name and address online. Use the internet as a tool to help you determine whether the person placing the order is actually the card holder. Do they have social media channels or other profiles online? If you can track them down online, chances are this is not fraud. You can also map out the address in Google maps and see the street view of the house. Is the house a nice, expensive house? Chances are that it is not fraud in that case. Or is the address an empty corner lot? If that is what shows up, then the order is likely fraud.

4. Beware of Freight Forwarders

When you search the address you might see that it is a shipping company or a mail box location. Freight forwarders usually ship packages out of the country. If that is the case, then it is another clue that could mean it is fraudulent, and is actually a little easier to figure out. If you call the freight forwarder and give them the account number that is listed with the address (extra numbers listed in the name or address), they can tell you if this is a long standing customer or if they are brand new and having a lot of packages delivered in a short period of time. If you explain to them that you are a merchant and you have an order to be shipped to them and you are trying to verify that it is not fraud, they will be very helpful and give you the information you need to determine if the order should be shipped or not. In the event you do ship and order to a freight forwarder and realize after the fact that it was fraudulent, you can also contact them and ask them to hold the package instead of forwarding it out of the country.

5. Misc. Factors

When the customer chooses express shipping that can often be a red flag. Using a free email address, especially Hotmail and Yahoo free email addresses are also suspect. The bottom line is that often it is a combination of several factors that can make an order look suspect. Of course, contacting the customer is always an option, but may not offer you conclusive evidence one way or the other. However, in most cases of fraud, the customer will not answer the phone number and will not return emails.

If you think that an order is fraudulent, you should definitely refund the credit card, which will avoid the charge back from the credit card companies and the fees that go along with that. If you are unsure, you can always let the customer know that you are working in their best interest to make sure that their credit card security is being protected and ask them for a money order or you can ask to be paid via Paypal, which is runs the security risk for you.


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