Wrong Number

Anti-Fraud Measures

You can fight back against online credit card fraud by investing in fraud-detection software, either separately or as part of your credit card processing service. So-called store-in-a-box solutions can provide a generally easy and inexpensive system for processing credit cards, including pre-authorization with Visa and Mastercard. (For more on stores-in-a-box, see "Bizstartups.com".)

If the anti-fraud tools that come bundled with your e-commerce so-lution provider or your credit card pro-cessing service aren't as robust as you want, however, you can invest in separate anti-fraud software and integrate it with your payment-processing service. These tools typically include real-time authorization capabilities to ensure the card number and expiration date are valid and customer funds are sufficient. Within the United States, tools also include AVSes. More advanced anti-fraud tools incorporate rules systems that are able to flag certain types of transactions based on customizable if/then statements (such as "IF the order is above $1,000 AND the shipping is express THEN review the order") and statistical models that learn by example and correlate trans-action attributes with known fraudulent activity.

Businesses serious about their fraud prevention often develop in-house historical databases that capture past orders, customer names, and valid and invalid shipping information. They may also use systems to rate each transaction for the likelihood of fraud through a series of checks.

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This article was originally published in the March 2001 print edition of Entrepreneur with the headline: Wrong Number.

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