What you need to be on the look out for 

We all want to believe the best of people, especially our customers. After all, they want something you’re selling. You have a relationship and it feels like they should be someone you’d like. Unfortunately, that isn’t always the case. 

In 2017, Australian etailers lost an estimated $476million to online purchase fraud. It’s a sad consequence in the huge surge in online shopping that criminal activity has surged along with it, endangering the livelihoods of business owners and creating a level of unease about what should be a simple transaction. 

As a business owner, that can be a bitter pill to swallow. And let’s be clear here, it’s not every or even most customers. The reality is that most of the transactions on your site will be legitimate and legal and you don’t want to treat all your customers like criminals every time something goes awry. But you do need to protect yourself by understanding what you need to look out for and how you can avoid scammers. 

How does online transaction fraud work?

There are three main kinds of fraud you’ll need to watch out for, with varying degrees of seriousness in intention and response: 

Friendly Fraud 

The friendly fraud is unintentional or accidental. Customers forget online transactions or do not recognise billing details. In other cases, they find that the product is not as per the description or say that they cancelled the order but the product still got delivered. 

Even though those customers may not have malicious intent, friendly fraud is a costly affair for businesses. The business has to bear the cost of return of goods, transaction processing costs and the fees charged by the bank or payment institution for the chargeback. Too many chargebacks, lead to a compromised relationship with the payment gateway or payment of higher commission. 

Chargeback Fraud 

Some customers cheat shops by way of shoplifting in the brick and mortar world. Similarly, they pull a fast one on online businesses using the ‘chargeback fraud’.  Intentional friendly frauds can be chargeback frauds. Customers purchase online and towards the end of the return period, claim that the item was not received or is faulty. They ask for a chargeback. Often not returning the item, faulty or otherwise. 

You might find it tricky to tell the difference between friendly fraud or a chargeback fraud and the cost of investigating the claims can climb quickly. Unfortunately, criminals know this and are banking on you letting it go. 

Credit Card Fraud

There are different kinds of credit card frauds. Fraudsters make purchases using stolen credit cards or compromised card data.  Fake credit card accounts are opened in the names of real people to conduct online transactions. They get the goods and the real person and the business get embroiled in the transaction reversal process leading to losses for the business. 

So what can you do? 

Whilst there’s no way to completely eliminate the risk of fraud, there are measures you can take to minimise the risk to your business. 


Ensure that you have the necessary documentation in place

  • Create a trail:
    • Request for an e-signature to confirm the order.
    • Send an email on confirmation of purchase.
    • Request for proof of delivery via a signature for physical products.
    • Only deliver to real addresses, not PO boxes. 
  • The business descriptor that appears in the delivery receipt and credit card bill should be identifiable with your business so that the customer knows from where the product is being shipped. There will be a lesser chance of friendly fraud and if the customer’s card has been compromised, it will be easy for them to track the fraudulent transactions in their billing statement. 
  • Record the IP address at the point of purchase. Chargeback fraud can be reduced as the customer will find it difficult to claim a wrong purchase if the billing address and IP address point to them. 
  • Record information like addresses, emails, countries, types of orders of past frauds to compare information on suspicious transactions and find out patterns either manually or using analytics tools. 


Verify key details like customer’s email address, phone number (if it is a mobile purchase), delivery address and credit card security code (number at the back of the credit card). It is known as CVV or CVN number. You can use products that offer additional security from frauds such as Verisign, McAfee Secure etc. 

Look out for familiar patterns

Sometimes totally legitimate customers do weird things like pay in a complicated manner or ship their order elsewhere. But when it comes to keeping your business safe, its best to hear hoofbeats and think horses, not zebras, so keep a lookout for any of the following red flags that might mean you’ve got a dodgy deal in the works: 

  • Orders with different billing address and delivery address
  • Orders with bad addresses (e.g. postcode not matching the address)
  • Multiple orders placed by one person using different credit cards.
  • Orders from a part of the world that you usually do not get from.
  • Multiple orders from one IP address. 

Delay the shipment for suspicious transactions and send a confirmation email that requires a reply. Customers don’t want to be defrauded either so if they aren’t doing anything untoward, they’ll likely be more than happy that you wanted to double check. 

Strong Transaction Practices

  • The terms of purchase, the return policy and the cancellation policy have to be crystal clear, easy to understand and easily accessible to the customer.
  • The process for returning goods should be easy so that the customer contacts the business rather than going to the bank or credit card issuer.
  • The customer has to agree to the terms of the transaction before confirming the order.
  • Simplify the process for customers to communicate with the business in case of concerns. If they have to call and wait for 20 minutes to just get automated responses, they will prefer to contact the bank to get a refund or file a chargeback – because they’re annoyed. 

Use Technology to your advantage

Build your online store on the right e-commerce platform that provides you with all the required functionality along with fraud protection measures. Ensure that you have updated security measures, fraud prevention tools, encryption tools and anti-malware software.  Use the latest technology tools such as business-card issuer collaboration in the sharing of transaction data. 

As the number of online transactions increases, the chances of online fraud also increase. It is imperative that businesses set up tools and processes so that their bottom line doesn’t take a hit. You can’t stop people trying to take advantage of your business, but you can make it incredibly hard for them to succeed. 

If you’d like to chat about getting your orders to your (legitimate) customers, we’d be delighted to talk to you. You can always give us a call on +61 2 9828 0111 (Sydney), +61 3 9240 300 (Melbourne) or +64 9 263 8855 (Auckland) or drop us a note via the form below. Alternatively, you can find a full list of available services here.

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