As with any business, it is important that you protect yourself from thieves. In a brick and mortar business, people can come in and shoplift your goods. They might break in the window in front of your store and clean out your expensive goods in the middle of the night. Maybe you will have an employee who dips into the cash register. There are so many ways that people can steal from you in the world of a physical store.
Did you know that they can steal from you over the Internet too? Believe me, I have been there, and I’ve learned many lessons because of thieves taking advantage of me. I hope that I can teach you how to avoid being the victim of Internet Fraud.
Over the past years, I have learned a lot about how to protect my business from being victimized. For the items that I sell, there are basically only two categories of products in my selection that are targeted by fraudsters. First, and the number one most targeted product is cellphone load. Here in the Philippines, cellular phones work a little different than in the USA, where I come from. You don’t have a phone bill that you pay each month, in most cases here. Instead, you purchase prepaid credits for your phone and you “load” them to your account. Generally, you purchase prepaid cards and you enter the PIN number into your phone, thus transferring the value of the prepaid card onto your cellular phone account. This is the highest fraud item that I sell on my sites. Hardly a week goes by without having multiple attempts to steal a load from me. But, in recent years, I have not been successfully stolen from by the fraudsters out to get a load. Instead, I have caught them, and have protected myself. I’ll teach you how to do it shortly. The other item that a lot of people try to steal is cellular phones themselves. Cell phones are high-value items, and if a fraudster can steal one from you, he is getting a really large theft. Using the same methods, I have been able to prevent fraudulent thefts on cell phones as well. Other than these two classes of items, it seems that all of my items are fraud-free. Nobody ever tries to steal the other items that I am selling.
How do I stop them? Well, I have a few methods:
- If the purchase for these high theft items is by a regular customer, we go ahead and fill the order immediately.
- If the purchase is by a new customer, we make a few checks:
- We check the IP address of the customer. Every computer on the Internet has an IP (Internet Protocol) address, which identifies where that computer is located. If the customer address is in Chicago, and his IP address says that he is in Nigeria, you can bet that he is trying to steal from you.
- We call all new customers on the telephone if they are purchasing one of these high theft items. In most cases, if somebody is trying to steal from you, they enter a fake telephone number. If you call and ask for the customer by name, you will either get an indication that the number is not in use or the person answering the phone never heard of the person you ask for. This is a sign of fraud.
- If the customer fails any of the above checks, we do not accept the order.
It’s that simple. If you are worried about the cost of calling overseas, do like I did, get some kind of VOIP solution. I use Vonage, and I can call anywhere in the world for free or close to free, after paying my monthly charge of $25 or so. In the years that I have used the above procedures to check for fraud, I have never lost a single cent to fraudulent orders, except for a few times when my employees did not follow the exact procedure that I laid out for them. You can bet, when they got hit with a fraudulent order and they did not follow the correct procedure, it was the last time that they did it! Because they got additional training, and they were told what would happen to their jobs the next time that they did not follow the procedure.
When I first got into the business that I am in now, only a week or so after I started, I got over $1,000 orders for load in a single day. I was ecstatic, I thought that business was going gangbusters. I thought that until I found out that people were stealing from me! You can bet that I fixed that problem quickly because I can’t afford to lose $1,000 every day. I doubt that you can either.
Keep in mind that after you get your e-commerce site up and running, looking out for fraud is probably the most important job that you have.
Thanks for the info Bob.I just started to build my website for e-commerce, after reading it your article’s i guess it is not easy and crazy indeed for those fraud sales, I guess I will not push through my ebusiness. Thanks
Hi Angel – It makes me sad that you are going to give up on the business! Just be careful about the fraud! You can do it, and make a nice living online, if you give it a try! Don’t give up so easily!
I really appreciate your words of encouragement. Thank You
If people are buying online doesn’t the credit card provider make the checks and authourise the payment to you? If there is fraud involved then wouldn’t the credit card number be declined or the loss is incured by the credit card issuer?
Hi Phil – Unfortunately, that is NOT that case for online merchants! Yes, the credit card is run for a check, nothing wrong with that end, but if the card comes back as fraudulent later down the road, the bite is on YOU. You see, if the credit card number has been stolen, but not yet reported, that card will be approved every time. It might take weeks before the credit card is reported as stolen, meaning that all the fake transactions done during those weeks are fraudulent, and the vendor pays.
Ok I understand now, so by doing the telephone check you know when its a fraudulent transaction. This must only apply with a landline number does it? You wouldn’t accept a cell phone number would you?
Hi Phil – I take whatever kind of phone they give me with their order. You see, if I call up it is usually obvious if it is legit. For example, if an order says it is Jim Smith in Los Angeles, and I call and a Nigerian or a Filipino answers, it’s pretty obvious that it is not legit. Just match up the name with the voice, and you can get an idea. It’s not perfect, but just a guideline.