Idaho companies are vulnerable to online fraud


Until you understand the risks associated with fraudulent online behavior, your business stands on shaky ground, even in Idaho.

Analysts that track online trends reported e-commerce grew by a healthy 16 percent in 2011, an impressive increase. But that increase was outpaced by fraud. Analyst and research group Gartner, Inc. reported a 25 percent increase in the web fraud detection sector during the same time frame. Clearly, staying ahead of the increasing threat of online fraud is not an easy task for any company.

The term “World Wide Web” has become so synonymous with the Internet that we often overlook the fact that the Web is truly world wide. Once your business is online, you are open to the entire world, and are subject to forces well beyond your Idaho storefront. Companies that are operating an e-commerce channel are exposed to the same criminal elements that wreak havoc on global corporations that are headlining the latest data breach. These criminals can operate anywhere, from Tucson to Thailand.

Here’s how it works. A criminal or criminal network uses stolen credit card information to make online purchases for almost anything of value – games, T-shirts, DVDs, airline tickets. (Stolen credit card information is easily obtained online just like any other product a person may wish to purchase. Of course it’s illegal, but that doesn’t stop criminals. Go figure.)

The goal is to turn stolen items into cash as quickly as possible. Once the fraudsters have the product, they look to sell or trade it on sites like eBay, craigslist or Often they put the items up for sale at remarkable discounts to make a quick buck. Some fraudsters actually make the sale before they fraudulently purchase the product and have it shipped directly to the unsuspecting buyer.

To make matters worse, in most cases the merchant is 100 percent liable for fraudulent purchases made online. That’s right. If your company accepts an order made with stolen or fraudulent payment (credit card) information and the credit card owner reports the fraud, the money is taken out of the your company’s account and you’re penalized with a “charge back” fee, somewhat like a bounced check charge for companies. Even if the bank approved the fraudulent transaction, they aren’t liable for it.

Law enforcement has a very difficult time tracking and prosecuting these types of crimes, because these crimes take resources they typically just don’t have. Often the actual criminals are in other countries, making prosecution a rarity.

So what can businesses do to protect themselves from online fraud? Here are a few suggestions:

  • Talk with your payment processor, the company or bank that actually processes the credit cards for purchases that are submitted for approval. See if they have any anti-fraud tools available for you to implement on your site.
  • Review your company’s policies for accepting online purchases and consider the following questions: What are the limits if an order came through for a large quantity of an item? What do you do if an order exceeds a certain dollar amount? Are you willing to ship out of the country? What do you do if the billing and shipping addresses don’t match? Do you require customers to create an account for purchasing?
  • Contact fraud detection and prevention companies to learn about solutions that would support your business.
  • If you do get a chargeback, work closely with your payment processor or bank to implement changes that help avoid future penalties.

Whether you’re operating in Idaho, Rhode Island, or overseas, there are two types of e-commerce companies: Those that have been hit by fraud, and those that will be hit by fraud. Be aware and protect your business.

Don Bush is director of marketing at Kount, a leading provider of fraud prevention technology. Prior to joining Kount, Don was marketing director at CradlePoint, a manufacturer of wireless routing solutions in the mobile broadband industry. Don has worked in hardware and software management for more than 20 years and as a partner in two top technology marketing agencies.

by Don Bush
Originally published at Idaho Business Review