It's key: Nix credit card fraud and increase online profits
By Jounice L. Nealy • Bankrate.com

March 18, 1999 -- Small-business owners who trade online must judge the character of their customers without ever seeing the whites of their eyes.

So, to calculate the risk that a sale represents, vendors need to be able to recognize the red flags that signal a potential theft.

The price of becoming aware
Audri and Jim Lanford launched NETrageous Inc. in 1995. The company provides marketing and publicity information online. Three years later they became the victims of a scam when someone ordered $500 worth of products using a cardholder's account number and address, but asked that it be shipped to a second location. The request was not unusual, Audri Lanford says, so NETrageous shipped a batch of tapes and manuals.

By the time the company found out that the customer was not the cardholder, it was too late. NETrageous was out $500.

"A vast majority of credit card fraud happens with e-mail from free (e-mail) services," says Lanford, who launched an online newsletter, Internet ScamBusters, after NETrageous was hit.

What to look for
ScamBusters offers small businesses tips on how to avoid credit card thieves. Lanford suggests that merchants also be wary of:

• Shipping addresses that do not match the credit card holder's address
• Incomplete order information
• Large orders coupled with a demand for next-day delivery
• International orders.

Consider a hired gun
The Lanfords suggest using one of several software programs or services that fight credit card fraud online.

One such program comes from Clear Commerce Corp. The Austin, Texas-based company offers software that will provide authorization on credit card transactions in cyberspace.

"When a consumer has selected the merchandise and hits the 'buy now' button, the Clear Commerce software takes over," according to Steve Saltwick, the company's vice president of marketing. "Clear Commerce software performs extensive fraud checks to protect the merchants in a card-not-present environment. The software performs authorization in real time," which lowers labor costs and the possibility of errors.

Clear Commerce software checks for several things, including repeated attempts to use the same account number and tumbling expiration dates, or attempts to use the same credit card with different names; and orders coming from a free e-mail address or from an address where fraud has been detected before.

A second firm, CyberSource, has a Web site that says the San Jose, Calif.-based company offers services that can reduce fraud to less than 1 percent. CyberSource allows businesses to customize its fraud screens. For example, when CyberSource software analyzes a transaction, it does the typical characteristic checks of the sale. But it also compares it to what the merchant has defined as normal. (i.e. It's normal for a flower shop to get two different addresses, a bill-to and a ship-to). The verification process takes about four seconds.

Jounice L. Nealy is a freelance writer
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-- Posted: March 7, 2000