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If you’re an online shopper and are afraid of credit card fraud spare a thought for those at the other side, the online vendors. The large majority of shoppers who lose money to fraud are reimbursed by their credit card issuer. On the other hand about 75% of vendors who suffer at the hands of fraudsters do not. So, what steps can the online vendors take to reduce this extremely damaging effect on their business? Below I have outlined 10 things to stick to if you are in the business of selling online:

1. Do not send goods to PO Box addresses. The owner of the PO Box could be located anywhere

2. Also be wary of shipping abroad as it’s harder to make claims. Countries such as Indonesia and Nigeria merit extra precaution.

3. Most fraudulent transactions give a free email address such as hotmail or yahoo so insist that the buyer provides a paid email address.

4. Only process the order after speaking to the buyer over the phone.

5. Verify the mailing address to ensure it matches the billing address. Most merchant accounts offer a service for doing this.

6. Have various anti-fraud warning signs and messages on the front of your web site. Like a car alarm sticker, these should hopefully scare some of the criminals away.

7. Consider taking out insurance to protect your business from credit card fraud.

8. Although many customers may be irked, ask them for a photocopy of the credit card showing signature and relevant data.

9. For obvious reasons, beware of a customer who seems to be willing to pay over the odds for the
good or is unconcerned by shipping fees.

10. Record the IP address of the customer. Refuse the order if you suspect they are browsing through an anonymous proxy service or at least phone the customer to find out why.

Credit cards were designed at a time when all transactions were done physically between two human beings. As a result, thieves have found it relatively easy to use stolen details online without the same checks being in place in a physical environment. Unfortunately, the seller of the goods and services is 100% liable for fraudulent transactions. By following the measures I have outlined above they can go some way to reducing the effect on them.

Andrew McNaught is a respected webmaster and owner of http://www.creditcard-clinic.com which provides tips and advice on all apects of the credit card world.

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Back in 1998 (through 2000 or so), I worked for a small company (called PaymentNet / then Signio) that handled online transactions. Verisign later purchased this company, and the product team I led integrated the “client” - the portion that took the credit card information and sent it to our servers for processing. The product name is Payflow Pro - maybe you’ve heard of it?

I’m going to limit this discussion to Visa / MasterCard credit cards — Amex and others operate slightly differently.

First, there is the bank that the consumer’s credit card is attached to. That bank is called the “acquiring institution” … it handles the “credit” you have on your credit card.

Then, there is the merchant bank. That’s where the business opens up a “merchant account” to be able to accept various forms of credit cards.

The merchant account is connected to another company called a “processor”. This “hidden” layer is the company that actually moves the funds from the acquiring institution to the merchant account (that process is called “settlement”). The processor also handles talking to the acquiring institution to make sure that the customer has the funds available (a process known as authorization).

Some well-known credit card processors are First Data Merchant Services (FDMS), Nova and PaymentTech.

Sitting on top of the processor is one of two primary systems either a swipe-card terminal (like those you see in Wal-Mart) or a “gateway” company that does basically the same thing, but over the Internet - that’s what Verisign Payment Services and Authorize.Net do.

Note that the waters are even muddier in many cases, for example, Wells Fargo can act as every piece of the puzzle in some circumstances.

So, what actually happens when you purchase something at Wal-Mart using a credit card?

a) You place your items from your “basket” onto the counter and scan them. the checkout system provides a total.

b) You swipe your card through a “terminal”, which reads the # off the magnetic stripe.

c) Wal-Mart dials their processor, and asks if you have the funds available on your credit card. The processor talks to your bank (the acquiring institution). If funds are available on the card, they are marked as “held” in your account (an authorization) - if not, the transaction is declined (yuk). Authorizations that are never settled tie up your credit card funds for a period of time, usually 10 days or so.

d) At the end of the day, Wal-Mart marks all the transactions they want to receive funds for, and submits them to their processor in a “batch”. The processor then contacts the acquiring institutions and transfers the funds to your merchant bank - which may make the funds available instantly (in a day or two), or may hold them for a while, or may hold the funds in a “rolling reserve” (keeping some funds held back in case a consumer fights the transaction, called a chargeback).

In the online world, replace the cash-register with an online shopping cart, and the electronic credit-card with terminal with called a “gateway” such as Payflow or Authorize.Net. the process is basically the same, with slightly more complexity.

Be careful going “a-la-carte” with ecommerce credit-card services: if the gateway you chose can’t talk to the processor your bank uses, or your software can’t talk to the gateway, you’re hosed. That situation was MUCH more common (things not working together) back in the mid/late 90’s than it is today. However, most “brick and mortar” banks (like your local branch) still don’t have a clue about online credit-card processing if they attempt to sell you a “leased terminal”, it’s best to run the other way and find a solution from reputable online source.

As an online merchant looking to accept credit cards, all you really need to know is that all services purchased through a single solution will usually work together seemlessly.

Nick Temple is a former engineer for what is now Verisign Payment Services. He can be reached at his website, http://www.nicktemple.com. He is part-owner of the CommerceStore.com; complete online credit card ecommerce solution.

My site, CommerceStore.com handles the entire “shopping cart” and storefront process, including talking to the gateway. It knows how to talk to every major gateway (online credit card terminal) available. In addition, we have direct relationships with various banks that can help you open a merchant account in the US or in Canada, and the system works with PayPal. There’s a whole lot more, including AutoResponders, built-in affiliate system, etc.

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Commerce and technology, combined as a one package - this is what online credit cards are.
With the advent of internet, the knowledge and communication barriers were broken. Also, with internet, came the concept of e-shops or virtual shops that existed only on the internet. You could shop at these shops by making use of their online credit card payment-acceptance ability. Once the online credit card payments were verified and approved, the goods got delivered to your door. This is what we call convenience at its best.

With more and more e-shops getting setup everyday, online credit card usage is becoming even more popular. The possibility of receiving online credit card payments has given a totally new dimension to shopping. Now, you can not only shop from the comfort of your home, you can even get discounts on these products. This is really amazing. No need to bother about the weather, no need to worry about the traffic jams or any other thing. Just go to an e-shop, select a product, make use of their online credit card payment-acceptance facility to make the payment and be ready to receive the goods at your doorstep.
With online credit card processing facility, starting a business (an online business) has become just unbelievably easy.

However, there is nothing without pitfalls. One of the pitfalls of online credit card usage is the possibility of online credit card fraud. This online credit card fraud can happen in two ways. The first one is related to the company, on whose website you made online credit card payment for purchase of goods; this company itself could be fraudulent i.e. it could take the online credit card payment from you but not deliver the goods to you. Moreover, they could use the details of your credit card (received through the filling up of online credit card payment form by you) for fraudulent purposes. The second type of fraud is committed by fraudsters who use various softwares/devices to capture the details of online credit card payments (as you enter them on the online credit card payment form of a website). These softwares are popularly known as spyware and these fraudsters as online spies. The spyware works by capturing keystrokes or taking screenshots of whatever you do on your computer and then passes it on to the spy. However, there are anti-spyware softwares available which can be used to counter such spyware.

So, the advent of online credit card usage facility is a boon to us. However, you must exercise caution when making online credit card payments e.g. don’t access your bank accounts or make online credit card payments from internet cafes (unless you are absolutely sure about the credentials of the internet caf

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