Entrepreneur: Online fraud seems to be a popular topic, but has the percentage of fraudulent transactions on eBay actually increased?
Rob Chesnut: There is less fraud on eBay today than there was three years ago. In the past five years, we've built our own fraud engine and now have a global team of 2,000 safety experts dedicated to identifying potential fraudulent activity. We've stayed ahead of a fast and challenging environment, and we've really made an impact. But I'm not satisfied. Fraud at any level on eBay just isn't acceptable.

Entrepreneur: Can you describe the most common forms of fraud?
Chesnut: Fraud usually occurs when buyers take transactions offline, away from the safe confines of eBay. In the rare instances it occurs on eBay, it's seller fraud committed on buyers, such as when the buyer sends payment and the seller fails to ship the merchandise, it gets lost or what the buyer receives isn't what was advertised. In those cases, the buyer files a complaint against the seller. The higher-dollar transactions have more potential for [fraudulent activity].

For sellers, the key issue is how to handle problem customers. Are you willing to live with [potential] negative feedback? Will you accept returns? Is the customer always right? The greater the level of trust you build, the more successful you'll be. Trust is determined by the number of transactions you've completed, the number of positive feedbacks you've received and whether or not you accept returns.

Entrepreneur: What is the difference between trust and safety?
Chesnut: Safety from potential crime and fraud is a prerequisite for trust. The more you do to demonstrate that you are a trustworthy seller, the safer your buyers will feel and the more they will buy from you.

Entrepreneur: What new features has eBay instituted to combat fraudulent transactions?
Chesnut: We just launched a number of initiatives designed to eliminate fraud and ensure safer transactions. Our Safeguarding Member IDs project helps prevent off-site fraud by hiding the bidder's User ID on transactions over $200 so buyers don't receive spam. We've also put restrictions on items popular with fraudsters and on luxury brands to keep counterfeits off the site.

And we are much less tolerant of sellers who offer buyers a mediocre customer experience. New feedback features enable buyers to give more detailed ratings, so sellers can differentiate themselves and buyers can make more informed decisions.

Entrepreneur: What can sellers do to protect themselves against fraud?
Chesnut: First, be suspicious of anyone who wants to complete a transaction offline. Second, communicate with buyers, and read their feedback history to see what they've bought and sold before. Third, offer a safe and secure payment method such as PayPal, which offers you and your buyers a high level of protection. Fourth, never click on suspicious links or phishing e-mails, and be sure your computer has the latest browser--Internet Explorer 7 or Firefox, which have built-in phishing protection. Finally, use common sense and be wary of unusual listings.

Marcia Layton turner writers regularly on small-business issues and is author of The Unofficial Guide to Marketing Your Small Business.