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Fraud and Security..

"My Credit Card Number was Abducted by Aliens!"

While it is not hard to find sensational headlines in the media about the latest internet scam, it is much rarer to come across FACTS to quantify how real the risk to merchants is when selling products online. Here is a few snippets we thought worth sharing:

• "the percentage of credit card chargebacks or losses in the online retail industry is actually lower than it is offline"
  - The National Office for the Information Economy (NOIE) (noie.gov.au).
   

• ‘Fear of placing electronic transactions has kept some would be buyers off the Web, just as fear of fraud keeps some businesses from diving in with both feet. But the reality is that Web-based transactions are, in many cases, safer than those that take place over the phone or even with bricks-and-mortar retailers.’
  - Hally Wolhandler, VP of Research at US based ActivMedia Research.
   

• These sentiments were noted in an issue of Industry Standard when it investigated fraud affecting credit associations like Visa and MasterCard. The article reported little difference in the rate of credit card fraud between online transactions and those conducted face-to-face, by mail or by phone. ‘In terms of percentage of fraud they track about the same, at less than 0.09 percent,’ said Steve Ryan, senior VP at eVisa, the credit card association's online unit, who is sceptical of stories claiming online fraud is much higher than offline. ‘There are always people trying to create the impression that there is a problem out there,’ said Ryan. ‘We don't have a fraud problem.’ Officials at rival MasterCard peg overall fraud rates at about 0.08 percent and agree with Visa that the rate of fraud for Internet transactions is roughly the same as for other non-face-to-face transactions such as mail orders and phone orders.
  - The National Office for the Information Economy  "Setting the record straight about online credit card fraud".

The best defence an online merchant seems to have against credit card fraud is a healthy serving of common sense when processing payments. Most merchants in a face-to-face transaction will have an "instinct" for shady customers. Similarly, an attempt at online fraud tends to look suspicious. Merchants who stay alert for the signs can identify most problems before they ship their goods.

The biggest mistake an online merchant can make is to rely on technical solutions. Features like Secure Sockets Layers (SSL), data encryption algorithms are fine to impress the "propeller heads" but will do very little to guarantee you get paid for your goods or services. And don't think for a second that your "friendly" bank manager will save you if a criminal does strike. They will debit you account faster than you can blink and probably charge a bank fee in the process. Help from the Police, don't count on this either.

One online merchant we have a great deal of respect for has a healthy approach. In his opinion, credit card fraud is just another cost of business and a very small cost at that. He  has calculated this to be a fraction of a percent based on a number of years of trading online. He also has a well considered check list for he AND his staff to follow with all the fraud danger signals listed. If an order fails the criteria based on his checklist, only a senior member of staff can approve the sale after various "extra" checks are completed. This is a classic case of simple common sense winning over technical gobbly gook.

So what are the secret danger signals, checklists and what nots?  It varies from business to business and demographic to demographic. If you need assistance in this area, we would be happy to share our thoughts and experiences with any client of WebStart Design.

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