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Home > News > 03/04/2010 > 0802
Credit Card Fraud – On Line Sales
House Martin has been selling Decorative Building Products for 9 years now. In the last 6 years we have taken around £1,000,000 in Credit Card transactions, and only had one problem. It would be fair to say we thought we’d a good understanding of all the scams that are going on!
We have had no problem selling to allegedly difficult countries such as Nigeria, even though the customers initially rang a few alarm bells. In reality the customer was totally genuine!
Since moving into Chudleigh we have had spurious “orders” from Malaysia, genuine orders from Australia, Belgium, Croatia, Dubai, Germany, Holland and Norway. So to lose over £2,00 to a “customer” in Scotland is a little galling.
As credit card fraud is on the increase perhaps you may find our experience helpful.
Credit Card transactions On Line involve several parties, all of whom strive to give a “secure” buying experience.
Typically transactions involve;
1. Business
2. Customer (either a Business or Private Individual)
3. Credit or Debit Card for 2 above.
4. High Street Bank
5. Financial Services provider (Card Payments Processor) such as “Elavon” or “Payment Sense” (other options are available.
6. Merchant Services Provider (Independent Banking Processor of “Secure” Real Time On Line Credit & Debit Cards) such as Paypoint
How does it all work?
Let’s imagine Mrs.Smith wants to buy a Ceiling Rose; she may find us on www.hm-online.co.uk. Having looked through the options she’ll usually require goods within 48 hours. Hopefully the Website will give her confidence to buy.
Having decided to purchase she could:
A. Post in a cheque, but this merely delays the transaction.
B. Pay by Credit Card.
C. Pay by Debit Card.
It’s more than likely she’ll choose B or C to speed delivery.
Next she’d either phone in an order (which is actually not as secure as online purchasing!) or proceed to buy using the online “Shopping Cart.
Many customers fail to realise an online sale does not reveal the details of the transaction to the vendor. All we get to see is the last 4 digits on a card and the CVV2 number on the back of the card.
If Mrs.Smith fills in these details the payment goes through a number of channels before reaching House Martin’s bank.
1. The Financial Services Provider will in this case process payment via an online system (or on phone in via a Hand Held terminal).
2. The Services provider will interface with the Merchant Services Provider who will perform a number of basic checks which determine whether the transaction can be processed.
Typically, an order placed in this way today would result in funds being transferred from Mrs.Smith to House Martin’s bank within 2 or 3 days. Job done! Or so you’d think.
On card payments the Card Provider has a “Clawback” facility. So we could in effect supply our largest ceiling rose and see £99.39 in our bank 3 days later, but if the card payment is disputed the funds can be siphoned out of our business bank account without notice. It is up to the Business to check on such “Clawbacks”; notification of these transactions does not always occur.
Customers sometimes present queries as they either query a payment, or simply forget the Goods have arrived, or the builder signs for materials which the client never gets to physically handle. It might seem odd, but it does happen. Providing Proof of Delivery will then usually result in funds being taken out of dispute, and returned to the vendor’s bank account.
Here’s the big catch however. No security system can be 100% secure. Unless the business does not hold stock and refuses orders, selling goods or services does involve an element of risk. The Merchant Services Provider will have a built-in security system, but it has various “bells and whistles” which can be tailored to your needs. So enabling one function can make the site “more secure”, but completely disable foreign customers from making a payment.
So what is the answer?
1. Be wary of large orders from distant sources. The old adage, “if it sounds too good to be true” it usually is.
2. Try to introduce a time delay on despatch if at all possible (while being honest with the customer).
3. Consider asking for a BACS transfer instead.
4. If you are unsure if the sale is genuine then employ an expert. A company such as The Third Man (0845 838 5350) has access to the very latest security risks, and can offer detail to prevent fraud. We wish we'd known about them earlier. While they charge £1.00 a minute for their checks it could save you (and us) thousands.
Lastly, if things go wrong the folk in Chudleigh Police station are there to help. They are working on our behalf right now!