Wrong Number

Helping Hands

Over the past two years, two nonprofit industry groups have formed to help merchants shield themselves from the slings and arrows of online credit card fraud. One is the Internet Fraud Prevention Advisory Council, supported by the Internet di-vision of HNC Software, a San Diego provider of Internet fraud risk management solutions. The other, the Worldwide E-Commerce Fraud Prevention Network, with free membership for all merchants, is being spearheaded and funded for the first year by American Express. Both groups aim to educate online merchants about anti-fraud practices as well as research and identify developing trends in Internet fraud and promote new fraud detection technology. The Fraud Prevention Network also offers helpful tools such as the "Fraud Test"-a quick, self-diagnostic questionnaire on its Web site that helps you pinpoint where your e-business may be most vulnerable to credit card fraud.

If you can't afford anti-fraud software, Ferguson offers tips on how you can gather what she calls the low-hanging fruit of fraud prevention. The best anti-fraud defense you can have, she says, is awareness of typical fraudulent behavior. Require all order-form fields to be filled in, and make sure credit card numbers match the card type (Visa, MasterCard or American Express). E-mail a receipt of the order to the address provided or call the consumer-you'll soon find out whether the contact information is fake. And be careful when you receive an order form with a free Internet-based e-mail account, as such accounts can be registered quite easily. Know your average order amounts and be suspicious of extraordinary orders as well as large-dollar orders of many low-priced items. Flag large orders that ask for express or P.O. Box shipping.

While one element alone may not be a telltale sign of fraud, a combination of a few could spell trouble. If several card numbers are attempted from the same IP address (a computer's location on the Internet) before one is finally accepted by your system, be very suspicious, Ferguson says-they could be mathematically generated from illegal, easily downloadable software. Encrypt data maintained on da-tabases or files accessible from the Internet, and immediately investigate and report to your credit card merchant any suspected loss of account or transaction information.

Online credit card fraud cost U.S. merchants $400 million by the end of 2000, according to Meridien Research. Developing an anti-fraud strategy now could help lessen your share of the burden.


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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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