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Help Prevent Fraud Losses: Virtual Terminal

Key Facts

  • Review orders for unusual activities
  • Use tools to help detect fraud
  • Verify the customer’s order information before you ship

Criminals like to place orders over the phone using stolen cards because they know that it’s harder for you to detect fraud. Learn how you can help keep more of your money with our fraud prevention tools and tips.

Why fraud prevention is important:

  • If you receive a fraudulent payment, you could be held financially responsible.
  • Since you know your business inside and out, you have the upper hand against fraudsters. By being proactive in fraud prevention, you have a much better chance of keeping your business safe.
Because most merchants prefer to do their own fraud checks in order to receive more authorized transactions, payments processed through Virtual Terminal are not as thoroughly reviewed for fraud as PayPal payments are. Transactions processed through Virtual Terminal are not eligible for PayPal Seller Protection.

Follow the 4 steps below to help protect your business against fraud.

1) Review orders for anything unusual

While none of these warning signs automatically mean that an order is fraudulent, if something looks too good to be true, it probably is. Here are some examples:

  1. Shipping address is in a high-risk country or location that’s known for fraud. You can search online to find a list of high-risk countries.
  2. Order is larger than normal. Use caution if you receive an order from a new customer that is larger than your normal order size and if it’s a product that’s in high demand, such as electronics.
  3. Abnormally large number of orders during an unusual time of day. For example: you receive 10 orders from US based customer(s), all around 3:00 a.m. on the same day.
  4. Abnormally large number of international orders within short period of time. For example: you receive over 50 orders from customers outside the US within a few days but you normally only receive 2 international orders within a month.
  5. Order consists of multiple requests for the same item. For example: a customer orders 50 pairs of the same shoe in various sizes. Ask yourself if it makes sense that a customer would order several of the same products. For example, why would a customer need 50 pairs of the same shoe?
  6. Several orders from different customers are all shipped to the same address. Fraudsters often steal credit cards from several different people and have the orders shipped to one address.
  7. Billing and shipping address don’t match. A legitimate customer is more likely to ship their order to their billing address. However, just because a customer ships the order to another address, it doesn’t automatically indicate fraud. It just means you should review riskier orders more carefully. For example: When your customer buys a gift, the billing and shipping address may not match so you won’t want to lose a sale based on this criteria alone. Instead, look at all the order details to see if there is anything else unusual.
  8. Customer asks you to change the shipping address after the order has been paid for. Make sure their address change makes sense. Fraudsters originally enter valid addresses so your fraud systems don’t catch them. Then they contact you to change the address.
  9. Multiple credit cards for same order. Be cautious if the customer provides you with several different credit card numbers. The cards can be in the same name or different names. The fraudster may ask you to split up or create multiple transactions using the various cards. If you don’t collect the credit card customer’s name, start requesting this information to help detect fraud.
  10. Rush or overnight shipping. Fraudsters like to receive merchandise quickly, regardless of the cost.
  11. Suspicious email address. Look for email addresses that seem unusual like knh$$yro123456@gmail.com or undeliverable emails. Legitimate customers are more likely to use email address that contain their name.
  12. Overpayments. If someone overpays you, do not send the extra money back through a wire transfer. Instead, return the money through PayPal. A fraudster may also ask you to send the overpayment to their preferred shipping company. Do not fall victim to this common scam.
  13. Suspicious shipping address. Before shipping an expensive order, make sure you know where the order is being shipped to. Criminals may ship orders to freight forwarders, shipping companies, P.O. boxes, or vacant properties so they can remain anonymous.
2) Use tools to help detect fraud

These fraud tools are used throughout the industry to help fight fraud. They’re available through PayPal and other fraud management vendors.

A) Address Verification Service (AVS)

Use AVS to verify if the billing address matches the one that the card issuer has on file. AVS compares the street number and ZIP code entered by the customer with information maintained by the card issuer.

How to set up AVS fraud filter through PayPal
  1. Log in to your PayPal account.
  2. Click Profile at the top of the page.
  3. Click My Selling Tools.
  4. Click update next to "Managing Risk and Fraud" in the "Getting paid and managing my risk" section.
  5. Review your AVS settings and if you find it necessary, edit your settings
B) Card Security Code (CSC)

Ask customers for their CSC. This is the 3 or 4 digit number located on the card that helps confirm they have the card with them. The CSC filter compares the number provided by the customer against the number on file with the issuer. A valid CSC helps verify that your customer has a physical card with them when they place an order. An invalid code could be the result of a customer's typographical error or it could indicate that a fraudster did not have the card with them.

How to set up CSC fraud filter through PayPal
  1. Log in to your PayPal account.
  2. Click Profile at the top of the page.
  3. Click My Selling Tools.
  4. Click update next to "Managing Risk and Fraud" in the "Getting paid and managing my risk" section.
  5. Review your CSC settings and if you find it necessary, edit your settings
C) Lookup the card BIN

The first 6 numbers listed on a card is called a Bank Identification Number (BIN). It gives you details about the financial institution that issued the card or card issuer. Use a BIN check service to find out where the card was issued. Be cautious if the billing address country and the card issuer country don’t match.

BIN checks are available at www.bin2country.com or can be purchased through fraud management companies.

3) Verify the customer’s order information before you ship

If an order seems suspicious and you can’t afford a loss, verify the customer’s order information, including the customer’s billing and shipping address, phone number, and credit card information. The amount of time you spend will depend on the cost of the item, what you are selling, and your willingness to take the risk.

A) Verify the shipping address

Go online and verify the shipping address. Look for red flags such as shipping to a freight forwarder, shipping company, P.O. box, hotel, or a vacant property. Fraudsters often ship orders to addresses that can't be traced back to them.

  • Freight forwarder: Third party shipping service that reships merchandise to another location (typically abroad) for a fee. To see where your package is being sent to, simply enter the shipping address into a search engine. If the search results show the name of shipping company, be more cautious.
  • Shipping companies or P.O. boxes: Fraudsters like the anonymity that shipping companies and P.O. boxes provide. However, there are also a lot of legitimate reasons for using a shipping company or a P.O. box. You just need to be more cautious, since shipping to P.O. boxes and shipping companies are typically more risky than shipping to residential addresses.
  • Money mule: Fraudsters pay people (known as money mules) to have orders shipped to their address. The money mule receives the package, then reships it to the fraudster’s address. Be careful if you have a lot of orders from different customers that are shipped to the same address.
  • Vacant property: To identify vacant properties, enter the shipping address into a search engine. If the property is currently listed as for rent or for sale, it could be vacant.

Shipping address example: A new customer orders a $10,000 chandelier. Here is what you can do:

  • Search an online map to see who and where the order is being shipped. Is the order being shipped to an expensive home, motel, or to a freight forwarder?
  • Use a search engine or social networking site to verify the name and shipping address. Does the name, shipping address and billing address match?
B) Verify the phone number

Use a reverse phone look-up or third party data supplier to verify the customer’s name and address. You can also call the customer’s phone number. Don’t rely on caller ID since customers can use spoofing services to disguise their real phone number. These services even let them change their voice.

Reverse phone look-ups are available at www.whitepages.com.

C) Contact the customer to confirm the order information

If an order appears suspicious, contact the customer by phone or email to verify information. Ask questions to see if everything checks out. Be cautious if the phone number is disconnected or if the email bounces back.

D) Delay shipping high-risk orders

If a transaction is fraudulent, account holders often notice and report the problem pretty quickly.

  • If possible, delay shipment for 24-48 hours for customers who place unusually large orders or buy items that are expensive and in demand, especially international orders.
  • Don’t ship overnight unless you're confident that the order is legitimate or you feel comfortable taking the risk.
4) Keep your Credit Card Statement Name updated

Make sure customers can recognize your business name on their debit or credit card statement. If a customer doesn't recognize your charge on their statement, they may think that the charge was fraudulent and open an unauthorized claim or chargeback. Click here to learn how to verify or update your Credit Card Statement Name.