Unfortunately, online payment remains a major area of Internet immaturity. Payment and data transfer security are allied problems. When buyer and seller meet physically to exchange money for goods, trust is less of an issue than when two entities deal blind online.

Physical presence offers security based on a customer signature and card imprint. But the merchant is almost always responsible for losses when sales are made on a ‘Cardholder Not Present’ basis even when the vendor has obtained authorization from the card issuer.

As an online vendor, your exposure to credit card fraud depends to a large extent on what you’re selling. Intangibles are the easiest target. Top of the list by far are adult sex sites. Since these are prohibited by 2CO, this shouldn’t be an issue for any of you. However, as stated, intangibles are high risk, regardless of the service being sold.

Software sales, instant downloads, gambling sites, informational sites, instant ebooks, web-hosting, among others are equally at risk. Indeed, we try to avoid orders from free email account holders or overseas customers, with obvious IP/billing address discrepancies. Microsoft’s Expedia set aside $6 million for credit card fraud in 1999 but most online retailers refuse to divulge fraud figures for fear of losing customer confidence.

Large ticket item sales are just as risky. For example, many online retailers now refuse to accept orders with different billing and delivery addresses, which 2CO closely monitors as well. However, even this doesn’t help if someone is prepared to set up fake credit card accounts using empty house addresses - and there are criminal organizations exploiting the weaknesses of the credit card system in this and other ways.

It’s a problem which can only get worse without a change to a more secure online payment system which both proves the identity of both parties and cannot be repudiated. Both sellers and buyers must have confidence in online sales. If online sales don’t become more secure vendors will either insist on payment up front or become uneconomic as their increased sales costs penalize their customers for buying online.

Here are some Anti-Fraud Tips For Online Vendors, many of which the 2CO Fraud Team frequently use:

1. Even though it might be a hassle, insist on a mailing address, zip or postal code and phone number of the buyer and then check them out to ensure they aren’t fake.

2. If you can’t contact the buyer by phone or the phone number is unreachable, then don’t process the order

3. Use Address Verification services where they’re available

4. Be aware of the high risk or high fraud countries.

5. Check the email address against the name on the credit card. If the real name doesn’t match the email name then you definitely want more reassurance before processing the order.

6. Refuse to process orders from free email domains unless you have incontrovertible proof of the buyer’s identity.

7. Never ship products to postal box numbers. Always insist on a physical shipping address.

8. Check the DNS table of the remote IP of the customer. Find out the remote server’s geographic area and check it against the address of the customer. Few people connect to the Net using a long distance call. You also need to check the mailing address, phone number and email address of the server, though thieves can also set up servers too.

9. Be especially careful of those wanting higher priced fast delivery or otherwise being price insensitive. Thieves don’t care how much it costs as they don’t plan to pay.