Credit card fraud is an ever-growing problem for small-business owners. Take these steps now to protect your business before it’s too late.
According to comScore, the first quarter of 2013 saw retail e-commerce sales surpass $50 billion in the U.S., with 10 percent of all discretionary income being spent online. Last year global e-commerce surpassed $1 trillion. While this is great news for small businesses with e-commerce websites, the risk of loss also increases.
Cybersource, a payment and risk management services company, indicates that e-commerce losses due to fraud topped $3.5 billion last year. With nearly $10 million being lost to fraudulent transactions daily, small-business owners need to be especially vigilant, as a few bad sales could spoil your quarter or even your year.
Common Fraud
I recently met with one of the owners of a Miami-based welding supply company in business since 1981. The company launched a robust e-commerce website selling welding equipment and related consumables. Soon after the launch of the website, the owners were pleased when one of the first orders totaled over $4,000 in welding safety gear. The buyer paid online with a credit card. Such a transaction isn’t unusually large in the offline world, so the owners weren’t suspicious. The company packaged the merchandise and shipped it out to the buyer. That’s when everything started to go wrong.
Two days later, as part of a normal follow-up procedure, one of the partners called the phone number provided by the buyer to thank them for their transaction. Oddly, they couldn’t get someone on the line during normal business hours. After several attempts they decided to use the billing address to conduct a search and find an alternative telephone number online. When they searched the address, it turned out to be a residence, not a business. That started to raise their suspicions that something didn’t seem right. They then conducted a search on the shipping address. It also turned out to be a residence. Now the owners were getting really nervous. A small buyer could certainly have a residential billing address but it’s highly unlikely that they’ll also have a warehouse in their garage. The owners decided to dig a little deeper and discovered that the shipping address was a house that had been abandoned due to a foreclosure process. That was a red alert.
