Everybody knows that fraud is a growing problem for internet ecommerce merchants. While fraud can impact all types of merchants, the degree of fraud an internet merchant experiences often correlates to the type of product being sold by the merchant.
For example, the television show Dateline conducted an investigation into online credit card fraud. To attract cybercriminals, Dateline set up a fake internet store selling electronics.
Fraudsters are like most other criminals. They are lazy. The criminals look for the easiest way to make the most money in the fastest time. Merchants selling high ticket items that can be quickly resold are magnets for fraudsters.
Merchants selling downloadable content, phone services, subscriptions, tickets, and other services are also targeted for fraud. The reason is that there is no proof that a product has been delivered as there is with goods that are physically shipped.
These merchants are not necessarily targeted by sophisticated international criminal rings. Instead, there are internet shoppers that know how to play the credit card processing system.
The buyers understand that if they initiate a chargeback with the bank that issued their credit card, the merchant has no way of proving that the items purchased have actually been received. The buyer can deny receipt of the items and the merchant is hit with chargebacks.
Merchants with chargebacks exceeding 1% are at risk of having their merchant accounts terminated. If this happens, the merchant loses the ability to accept credit card payments. Once terminated, a merchant has an extraordinary difficult time establishing merchant account processing in the future.
