Online retailers could be hit by a bill of over £105 million this Christmas as they pick up the tab for credit card fraud. The most recent estimate for online spend within the UK over the festive season is £13.16 billion. However, leading European online payments system Moneybookers estimates that online retailers will suffer fraud equivalent to 0.8% of that total.*
Because of the way that most online payment systems work, retailers will be left with the cost of this fraud – rather than consumers. Facing the prospect of slowing consumer spending in 2009, cash-strapped online retailers can ill-afford this additional expense.
Moneybookers fraud experts see the highest credit card risk fraud for small businesses in accepting payments from UK- and US-based cards. However, the business has seen a significant rise in fraudulent activity in other Western European countries, such as France, Germany and Italy where internet-based card fraud has been less of an issue historically.
This has been in part because fraudsters have moved on to target these markets as consumers in the UK and US have become savvier about protecting themselves – as demonstrated by the strong rise in use of eWallet payment systems – such as Moneybookers and other online payment businesses.
Martin Ott, joint-Chief Executive of Moneybookers said:
“Few of the online payments systems put their money where their mouths are when it comes to fraud. Most will claim that they are totally secure, but will still pass on the cost of fraud to the retailers that use them. We believe that online payments providers should be more transparent with the retailers that use them and actively demonstrate confidence in their systems by shouldering the cost of fraud themselves, rather than passing it on.”
Moneybookers offers its retail partners a “no chargeback policy”. This means that, once a sale is confirmed, a retailer using Moneybookers can be sure that they won’t be left without their goods and without the money a customer paid for them – which can be the case with other payments services. Customers, on the other hand, can securely use Moneybookers escrow service – where their money will only be transferred to the merchants if they are satisfied with the goods received.
According to industry and government campaign, Get Safe Online, Forty four percent of small businesses in the UK have been a victim of cyber crime, including internet scams, identity fraud, phishing and data theft. However, there are some steps that online retailers can take to avoid becoming a victim of online fraud if they are trading online or are thinking about starting out on the web.
Martin Ott, co-CEO of Moneybookers offers his advice …
1. Always be wary
Many smaller online retailers may never have experienced fraudulent payments. This is why, often, they make an attractive target for criminals – they have fewer protections in place, can get so excited by a large order that they drop their guard and are less likely to have experienced fraud before, so are less familiar with the danger signs. Being on guard always is key.
2. Learn the transaction tell-tale signs
If a customer who has never purchased from you before makes a large purchase of items that would be easy to re-sell, be on your guard. While some criminals will make a series of legitimate smaller purchases (to build your trust) before making a large one that is fraudulent, many will just make a large, one-off purchase. Keep a close watch on these sorts of transactions and, if you are suspicious, act on those suspicions.
3. Know your customers
Be wary of certain patterns – for example where invoice or billing addresses are different from delivery addresses (although these can be gifts of course, so do check with the customer if you are worried). Never send goods to a PO Box unless there are compelling reasons to do so. Check foreign purchases and call the customer if they provide you with a telephone number, especially for large purchases or unusual addresses. Be particularly wary of orders placed between 1.00 am and 4.00 am, when criminals hope that there will be little manual checking of payments.
4. Don’t be afraid to be suspiciousIf you are concerned that a transaction is not all that it should be, contact the buyer. If there is fraud involved, a criminal is unlikely to respond – they would rather not leave a trail of contact, even if it means that they might get away with a crime. Ask probing questions and void or refund payments if you aren’t happy with them. It’s better to lose a sale than lose both your merchandise and the money.
5. Use the payment technology availableMost online retailers will accept credit and debit cards through a payment service. Where this is the case, think about using all of the payment checks available – CV2 (the three digits from the back of the card); address verification (AVS); 3D Secure (including Verified by Visa and Mastercard SecureCode). Your payment provider or bank will be able to tell you about these.
Get an industry blacklist (from your Credit Card Company or third party providers) that will alert you to cards that have been stolen so that you can refuse payments.
Think about encouraging users to pay through an eWallet (such as Moneybookers or PayPal). These are often more secure and some (such as Moneybookers) have a “no charge-back guarantee” which means that you don’t carry the cost of fraud – the eWallet provider takes that risk.