Here's a scenario that will help you identify who is savvy to credit card fraud and who is not.

Let's say that John Smith runs an Internet store that sells books. His store is called Leaflets for Life. Customers order, then he ships the product a few days later.

We have another Internet store owner named Joe Black. He runs a computer parts store called Laptops 4 U. The owner of Laptops 4 U is aware that his merchandise is THE HOTTEST ITEM to
steal on the Internet. (besides credit card numbers, of course) John Smith puts his feet, turns on the satellite TV, and lets the Internet run his business silently.

John Smith gets a sale on his online store. The order is for 300 books. John loves the way the Internet allows his business to pretty much operate on autopilot. He knows that the 3rd party vendor he uses to take all his credit card sales took care of it, so all he has to do is print an invoice and pack it up. Off he goes with the merchandise to the post office, marveling at his first sale from his store.

Joe Black gets a sale on his online store. The order is for a $3,500.00 laptop. He does not use a 3rd party vendor for his credit card processing. He just has a store that uses Secure Socket Layer, then it emails him with a link that he clicks on to take him to his orders. Joe Black's process takes a lot more administrative work, but he feels in control of his business. He really wants to be aware of what goes on every minute. Joe, or whoever prints out the orders from the store, takes a long, leisurely look at this order. He knows what he is looking for. He gives the order to a orders clerk. The orders clerk picks up the phone, dials the number on the order. "Mr. Jones, hi, my name is Angela. I work here in the customer service department, and we are verifying your order from our online store. To protect your security could you tell us if you ordered items from our online store today, and if you did, could you please provide us with some verification of your order. We WANT TO PROTECT YOU. Could you please give us the 800 number on the back of your credit card and your bank's name?" Customer: "Uh, who are you trying to call? This is the roller skating rink in Topeka, Kansas." Angela thinks that perhaps the person who ordered just mistyped the phone number. She gets out her list of merchant phone numbers and calls up Mastercard. "Hello, My name is Angela, and my company is Laptops 4 U. We are a merchant on the Internet, and we need to somehow verify that a card number used on our online store was not stolen." Mastercard happily gives her address of the cardholder and other information that tells Angela that her company could have lost a laptop and possibly their merchant account when the credit number does not go through the system.

......the transaction stops RIGHT THERE. Go no further.
(this is not a totally untrue story...happened to us in a similar situation)

John Smith gets the statement from his Merchant Account provider about a month later. He has sold about 1,000 books this month. His books are a real hot item! Two days later, John Smith gets another letter from his merchant provider. John's merchant provider, like many, automatically deposits or deducts credit card transactions from his checking account. After John got the first statement, he gave most of the profits to his wife so that she could go down to the A&P superstore and buy some food. She also decides they need a new living room couch. The money's spent. The 300 books that someone ordered, well - they were ordered on a stolen credit card number. Did John or his automated online store merchant know this? How could they? The owner of the credit card did not know their number and expiration date had been lifted from a store somewhere on the Net. John is out 300 books and $4,485.00 in revenue. He also receives a threatening notice that if this happens again, he'll lose his merchant account.

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Did you notice anything strange about the merchant account provider taking the money away from John? Mastercard did not eat any of the loss, and neither did John's merchant account provider..notice that? The merchant eats ALL OF IT. John is now in debt to the merchant account provider, and some nimrod is off selling his books in some far away corner of the Internet.

About the Author:
Lynne Schlumpf is the CEO of Route 66 Cyber Cafe, Inc., http://www.r66cci.com, a Web hosting and design company specializing in promoting websites for new owners, building affordable e-commerce sites, and providing reliable web hosting solutions as an affiliate of Virtualis Incorporated.

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