Fraud is prevalent in all Internet transactions, especially when the product is intangible. We have been in this industry long enough to see significant growth and development. We have also been here to see the growth and development of fraudulent activity. We would like to remind you that it is important to utilize 2Checkout’s fraud review. We have the advantage of state-of-the-art software and a knowledgeable staff with 35 years collective experience. In addition to our fraud review, we encourage you to utilize the information made available to you in the vendor administration area. We would like to give you some tips on how to recognize legitimate orders while preventing fraud.

While it is important to mitigate fraud, you want to be sure that you are not inadvertently denying legitimate business. With the current credit card system in place, we are not as protected as a traditional retailer is. Because we are working in a “Card Not Present” environment, chargebacks will occur. We have found on average, 12% of your orders may appear to be suspicious, but only 1% will end up being fraudulent. It is very important that you don’t insult the 11% legitimate customers just to catch the 1% fraudulent customers. While working with digital products, losses are less formidable because there are no shipping fees and no items to be lost. The following information will help you to differentiate between legitimate customers and fraudsters.

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One of the more challenging issues we have to work around involves new vendors. While we do have a wealth of knowledge and experience relating to the various types of fraud, it can prove somewhat more problematic to link this knowledge with a new vendor. First, we must understand our vendor and the aspects of their business that may be at risk of fraudulent activity.

Types of customers and fraud:

With all new vendors, we must start from the ground up. From the moment our partnership begins, we attempt to assess what types of customers our vendors will be receiving. For the purpose of this study, we reviewed one of our new vendors and will now refer to them as “Supplier A“. In the case of Supplier A, several discrepancies were located in each order placed through their system. We noticed discrepancies between the billing information and the IP addresses, as well as discrepancies within our internal tools. While not unusual to find orders with these types of discrepancies, we did find that each new order placed had very similar discrepancies. This made it appear that the same person or group was attempting to circumvent the fraud review process and get by undetected. When we noticed such a large percent of Supplier A’s orders with these same discrepancies we then proceeded to take a higher level of caution with all new orders reviewed. It appeared that the trends changed slightly, receiving orders with matching billing addresses and IP addresses but suspicious email addresses as well as substantial and consistent discrepancies within our internal tools. This may have been the work of the same person or fraud ring placing the original orders, but it is also possible that the vendor was being hit by other fraudsters.

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This week is International Fraud Awareness Week. The Association of Certified Fraud Examiners (ACFE) has information and resources that can be used by anyone to combat all types of fraud.

“This weeklong campaign encourages business leaders and employees to proactively take steps to minimize the impact of fraud by promoting anti-fraud awareness and education.”

Share your ideas with us this week in a series of articles that will help define different types of fraud, highlight 2Checkout’s role in fighting fraud, and what we can all do to reduce the amount of fraud. By working together and communicating our ideas we can make online shopping safer for both customers and merchants.

Fighting Online Fraud with 2Checkout’s Sebbe Jones (Part Two)

In yesterday’s blog Fighting Online Fraud with 2Checkout’s Sebbe Jones, Sebbe discussed how 2Checkout developed a sophisticated fraud scrubbing process, over a number of years, by intimately learning the mitigation process, through the manual examination of tens of thousands of orders the first few years of 2Checkout’s existence. Through hard work and innovative thought, 2CO developed a world-class fraud scrubbing process, but “the times were a changin’.” Each year, fraudsters were becoming more advanced and organized and 2Checkout’s volume of sales was increasing at an amazing rate. It was all his staff could do to keep up with the increased volume of sales and fraudsters.

Then dark times hit. When 2Checkout switched its system from Version 1 to Version 2, the sophisticated fraud queue was errantly left out of the upgrade. Years of work were wiped out in an instant. Sebbe and his staff endured a two-fold increase in manual order checks. The days were growing long, fraudulent transactions were on the rise and something had to give. — (Back to Sebbe’s story)

Taking Fraud Fighting to the Next Level

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Who is managing your online fraud protection? If you have an active 2Checkout account we’ve got your back. If you are unsure or on your own, you better read more!

According to an article published this week in The Paypers, the FBI’s Internet Crime Complaint Center (IC3) registered over 275,000 online fraud complaints in 2008…” That’s a 33 percent increase from 2007 and equal to approximately $265 million in annual losses.

World-class fraud protection is invaluable to an online business but not cheap. The labor and technical expenses associated with providing adequate protection require a significant resource commitment, especially for small businesses. However, for 2Checkout account holders, fraud protection is just one of a number of value-added features included in our turnkey e-commerce service. And sometimes it takes statistical reminders from the FBI to remind us how crucial these add-on services are to running a profitable online business.

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