One of the major problems for internet merchants is fraud. In 2002, internet fraud cost business world wide over 15 million dollars in losses. Fraud costs your business money, and it can even cost you your merchant account.

How can you protect your internet merchant account against fraud?

First, there are a few different things to remember. Many credit card fraudsters use a free e-mail address, such as one provided by Yahoo or Hotmail, in an attempt to stay as anonymous as possible. However, there are many legitimate users who use the same methods, so you may not want to screen out all users of free e-mail services.

Another detection method is the IP address, which is basically the address that the internet uses to identify a user. Let’s say that the card user is from California, but the IP address can be tracked to Florida. That can sometimes be a danger. However, it is important to bear in mind that many people go on vacation, or may be using a company credit card for perfectly legitimate purposes.

So, what can be done about these different dangers? You don’t want to cut off all users just because you think they might be fraudulent, because by doing so, you may be losing legitimate business. Some people will hire fraud experts to go over the criteria in an attempt to screen out dangerous transactions. However, this takes time and money that could be used toward other parts of your business.

A better and more cost-effective solution is fraud-detecting software. There are many different kinds that can be purchased, but they have the same basic principles. These can take into account all the different risk factors, add them up, and give you an idea of how dangerous a given transaction might be. No software is 100% accurate, but they can at least give you an idea of how safe or dangerous a transaction may be.

Another great feature of fraud-detecting software is the ability to find out where fraud hotspots are on the internet. Some software gathers up the data from its users, and then locates where these hotspots are. You can either accept transactions from these hotspots or deny them.