4 New Ways Businesses Are Catching Credit Card Fraud

Image via Flickr by fonalité

At some point, every small business will likely experience fraud. It may be the result of customers trying to swindle companies with a fake credit card number or hackers trying to rob the business on a larger scale.

Either way, fraud can damage your credit history, hurt your reputation, and cost you money. Fortunately, fraudulent customers are pretty easy to spot if you know what you’re looking for. Here are a few ways to spot fraud within your online business before you fill the order.

Overly Large Purchases

One of the easiest ways to spot a fraudulent order in your online business is identifying a large purchase. They may be trying to swindle an affiliate cash back site, or they may just want to order items in bulk for resale. Either way, identify purchases well beyond your average ticket, and take a closer look at the order. Did the customer buy 10 blenders or 50 shirts at once? These are probably fraudulent charges.

Invalid Contact Information

If the order looks suspicious, consider reaching out to the customer to confirm. The customer may have meant to order five shirts but accidentally added the zero key before ordering. If the customer responds and is willing to communicate with you, then the order probably isn’t fraudulent. Most fraudulent activity includes bogus phone numbers or email addresses, preventing you from tracing the real customer. If you’re already suspicious of an account and then can’t reach the customer, the order is likely fraudulent.

Repeat Purchases

Once fraudulent customers realize you’re catching on to their large purchases, they might change their strategy and start ordering small orders regularly instead. For example, they might order 20 shirts in one day over the course of 18 orders. To identify this, look at the average number of each item sold daily. If you see an unexpected spike in activity, like a new item or something that hasn’t sold in weeks, check the order history to make sure each shipping address differs. If not, you may have fraud on your hands.

Many companies offer fraud alerts, especially on high-volume credit card processing accounts that process numerous orders throughout the day. This could be a smart way to receive alerts regarding multiple suspicious orders.

Expedited Shipping

One way fraudulent customers operate is by ordering goods and then paying for overnight shipping to get the order right away. Ideally, the item is on a truck to be delivered to them before the order gets cancelled. With this strategy, fraudulent customers get the best of both worlds. They get their money back, and they receive the item. To spot this, look for uncommon behavior in shipping methods. Would a customer pay $40 for overnight shipping on a $25 shirt? This points to fraud.

Unfortunately, fraud tends to be a never-ending problem for businesses. Even if they spot and eliminate one fraudulent account, another can pop up and take over within a few days or weeks. This is why you want to invest in fraud protection and monitoring to keep your business safe.