Credit card fraud - the retailer pays
One of the nicest things about having a credit card is the buyer protection offered by almost every card issuer. They assure you that if your card is lost or stolen you won’t be responsible for any of the fraudulent charges - Visa, MasterCard, American Express and their issuing banks are the heroes.
But who really bears the cost of fraudulent charges? The retailer. That’s right - as a retailer you are responsible for determining whether or not a credit card charge is legitimate. In a lot of ways this makes perfect sense - if the credit card companies were responsible for these charges then small retailers could easily take them for millions of dollars. The point-of-sale contact needs to have a vested interest in qualifying their potential buyers since they have the only interaction with the buyer.
There are many measures that you can take to protect yourself - first of all, use address verification on all orders. As a secondary precaution require buyers to put in their credit card verification number. Finally, if you are going to ship products internationally you need to check the IP address of the buyer and verify that it matches the same country the order is shipping to.
I will admit that when I first started working in internet retail four years ago I didn’t realize that an order that was shipping to Lagos, Nigeria (with a million red flags) was fraudulent. We lost a little money on that order but we learned the value of doing decent fraud detection, especially on international orders.
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I really think that by not shipping to Nigeria you are eliminating a HUGE market. I understand that Nigeria’s economy has flourished in the last decade. It’s also come to my attention that recently there are several wealthy individuals in Nigeria that are passing away and if you just provide your bank account and routing number to one of the family descedents, they will give you a cut. I am expecting a deposit into my personal account any day now.
Comment by Cameron — January 24, 2006 @ 12:05 am
Cameron, you are a scholar and a gentleman - nobody can disasgree with that logic. I definitely think we should reconsider our shipping policies to Nigeria.
Comment by admin — January 24, 2006 @ 12:11 am
[…] In my not-so-humble opinion, every internet retailer should allow customers to purchase merchandise by using a credit card despite the fact that the retailer will ultimately pick up the tab for fraud. The most compelling argument for accepting credit card payments is that virtually every internet shopper has a credit card and because of the protection offered by their issuing bank (courtesy of the retailers), most shoppers feel comfortable using their credit card online. […]
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