With the Holidays being here, merchants should be extra aware of online fraud. When it comes to online fraud most people think credit card fraud. But personally, I see another type of fraud more often than stolen credit cards. The one I see most often is shipping fraud.

Shipping fraud is a type of fraud committed by individuals using their own legitimate information.

Here are a few examples of this type of fraud:

- Denying receipt of goods. This occurs when an individual places an order and receives the merchandise, but then denies that it was received. If you are shipping high-value items, requiring a signature upon receipt may help to combat this problem. Otherwise, just try to be observant for repeat offenses of this type of thing. The same customer may try to commit this type of fraud more than once. This type of fraud is more common when shipping through the postal service.

- Denying the purchase ever occurred. A customer may claim that their credit card was stolen and they were not the person who made the purchase, therefore should not have to pay. This is a hard type of fraud to detect and combat, but again a signature upon receipt may help.

- Returning the wrong goods It is not unheard of for a customer to return old or damaged goods in place of the new ones they ordered and then demand a refund. This may be able to be addressed by refusing to refund the purchase but you have to ensure that fraudulent activity was committed, which can be difficult. The most common way this occurs, us best illustrated using an example:

“Johnny Dishonest’s iPod stops working and he decides to buy a new one online. When he receives
his new one, he keeps the new one, and then boxes up the old one in the packaging he just received.
He returns it with some excuse and you give him the refund. Not only did you lose the original iPod,
but you also refunded his money.”

Always check your returns carefully. If you can, try to have an internal tracking system to identify repeat fraud. Anytime a transaction is “questionable” or fraudulent the order information (minus specific payment information) can be stored so you can identify repeat questionable transactions and catch potential fraud up front.