How to Combat Fraud
It used to be that direct commerce fraud was limited to high-ticket items like electronics and jewelry that could easily be resold on the black market. However, the advent of online auctions and classified ad sites, where fraudsters can re-sell items purchased with stolen credits cards for as much as 60 cents on the dollar, has opened up an entirely new range of products to fraud.
What’s more, companies selling high-tech merchandise have become really good at fraud control. So even though fraudsters keep “testing the fence” to see if they can get high-value goods, it’s much easier for them to focus on mid-range products.
As such, the average direct marketer is beginning to feel the heat. Here are a few simple steps you can follow to protect your company from fraud.
First, establish what your fraud level really is by examining your chargeback rate. If you’re facing a chargeback rate of less than .05 percent due to fraud, systematic antifraud measures will be more trouble than they’re worth. If you are in the .2 percent to .3 percent range or higher, you’re in the danger zone.
If fraud is a danger, you need to be proactive and screen orders to kick out potential fraud. Start by implementing some common sense measures. For instance, screen orders from free Internet e-mail addresses, where no billing relationship exists; orders of high value, product categories with maximum resale value; and any other factors you think are important based on your company profile, such as geographic redlining. And, of course, you should include as part of the screening process a list of known fraudulent customers from your files.
Next, take advantage of fraud-fighting services offered by your payment processor such as address verification service and card verification value. You also should consider Verify by Visa or Mastercard SecureCode, although their second set of screens to place an online order can depress sales completion rates and thereby make the lower interchange rate and chargeback protection less attractive.