According to the 2009 Visa Security Summit, small businesses “are increasingly a larger percentage of compromise incidents yet are the least prepared to deal with such challenges to their business.” If you are an online merchant, you’re facing even greater threat. Online transaction fraud is one of the fastest growing criminal fraud segments, and without the proper protection, your online store could be at significant risk.
Verification Fraud
Verification fraud is one of the most common types of fraud that online merchants face. The criminal perpetrating the fraud often uses the store simply to gain information about the credit card numbers they are generating, seeking to identify numbers that are valid.
Settlement Fraud
Upon determining the validity of the credit card numbers, the criminal then uses that card to purchase goods, attempting to get your store to ship large quantities of goods to a different location. The goal of the criminal is to spend as much as possible as quickly as possible before the card owner discovers the issue and reports the problem. By the time this happens, the online merchant is usually stuck with enormous chargeback debt.
Affiliate Fraud
One of the most common frauds that occur involve an innocent buyer and an innocent seller who are both being used by the fraud perpetrator who sets up a dummy storefront and creates orders for which the criminal either intercepts the payment, collects the affiliate fee, or both.
Being a target of fraud can be a devastating and costly experience for a business owner. Online business owners who offer affiliate or reseller programs or who offer multi-payment trials often meet with the highest risk, according to Jeremy Drzal of Kount , a fraud detection and prevention company. Drzal outlines the process these criminals use at All Pay News:
courtesy of All Pay News
The most frustrating part about these types of fraud is that it can take several weeks or even longer before you as the online merchant become aware of the problem, and tracking down the criminal is difficult. These criminals can work from anywhere and often disguise their location and IP address by hacking into public computers at libraries or Internet cafes.
The fallout from these kinds of criminal schemes is expensive. Not only does the online merchant often pay an affiliate fee to the very criminal who perpetuated the fraud, but can also face additional losses for chargebacks, uncollectible accounts payables, and lost product.
You can protect yourself and your e-commerce business from being the victim of this type of fraud with a service like Kount’s Dynamic Fraud Detection SaaS. Kount’s fraud protection includes integrated solutions through patented Device Fingerprinting and IP Proxy Piercing platform. Integrating these solutions into your e-commerce store can significantly reduce the amount of fraud your store will face by protecting you against:
- Constantly changing customer personas.
- Anonymizing tools.
- Highly organized networks of compromised terminals (botnets).
- Rapid proliferation of stolen cards including CVV and PIN’s.
I partner with Kount and have integrated Kount into ShopSite stores. If you are ready to take a significant step toward discouraging fraud, contact me for more information about Kount and how you can protect your ShopSite store.
If you’d like to receive regular technology updates from The View From Under the Hat, subscribe via RSS or email.
Photo credit: peasap
{ 2 comments… read them below or add one }
Well thankfully there is technology out there that prevents or at least reduces this affiliate fraud. I found your site as I was researching data to reduce this type of small business “terrorism”. Unfortunately wherever there is money to be made there are dishonest people who are willing to scam.
Very true Philip. Businesses that aren’t vigilant about fraud protection are easier prey and there are many hunters. Thank you for your comment.