Small and medium-sized businesses are increasingly
becoming the targets of “fraudsters”, losing revenue as
inventory leaves their warehouses and card-issuing banks
side with consumers by reimbursing them for being the
victims of fraudulent activity. Furthermore, many banks
and credit card companies will not reimburse the merchant,
resulting in brand damage.
It is estimated that SMBs lose upwards of $66,000 annually
through fraud, so implementing safeguards to limit this
activity will go a long way towards reversing this trend. SMB
merchants can follow the following best practices to be more
vigilant and better prepared to identify if they are fraudulent:
1. Activate fraud prevention tools in the payment process
and back-office systems to detect fraud and create
processes to evaluate those orders that contain certain indicators
of fraudulent activity.
2.Require card identification (CID) information, the extra
three or four digits used for security on all credit cards, and
address verification on all orders paid by credit card. Doing
so typically ensures the buyer actually has the card in hand
and is shipping to the address associated with the card
holder. Where it is a separate ship to/gift to address, collect
”bill to address” to confirm authenticity.
3.Review past orders that have been fraudulent to uncover
the themes that are specific to your business.
Certain products such as electronics are more captivating to
fraudsters than others, and therefore are more at risk for
fraudulent activity. SMB merchants should look closely at all
orders and be conscious of these warning signs of fraud:
• Orders that are significantly larger than the average size
• First-time buyers
• Orders shipping internationally
• Search for orders without a CID number or a CID that doesn’t
match the credit card number
• Overnight requests
About the author: Fred Lizza is the chief executive officer at Dydacomp,
a provider of business technology platforms for small and mid-sized
e-commerce and multi-channel merchants.