Tuesday, 23 February 2016

Stopping The Scammers


Our previous article focused on securing an e-commerce website against hacking.

This article addresses the ways you can reduce the chance of fraudulent transactions being successful (in a bad way!)

Our website sells silver and gold jewellery, a desirable commodity for potential scammers. They seem to think that is ok to steal from anyone without a thought to the consequences of their actions. Over the past 5 years I have seen many different ways that these a**holes will try to game the system and I have had to devise a number of methods to reduce the chance of their success.

Firstly, as an on-line store, there must be a way to collect payment from our customers. We offer several methods of payment, some more secure than others.

Cash Payments

Cash is not an option as your customers physically cannot hand it to you. Sending cash through the post is not advised as no-one will insure against it not arriving. For an on-line store it simply is not an option and leaves the customer in a vulnerable position.

Money Orders

Money orders sent through a post office are the equivalent of cash. The customer pays the post office for the money order with cash or a bank transfer and the money order is sent by post to the store. The store receiving the money order is paid in cash at the post office, and is normally required to present proof of identity at that time. Once cashed, they cannot be withdrawn.

Direct Deposits

Direct deposit into your bank account is by far the best option for a merchant. Once the money has been transferred, you are absolutely assured it is yours. The customer cannot reverse the transfer. It can only be reversed (refunded) by the account holder receiving the deposit. This is the payment method you should promote to your customers. Giving a discount for direct deposits may convince the customer to complete their order.


Cheques are generally safe but the funds can take 3 to 5 days to clear and arrive into your account. If the owner of the account disputes the cheque payment, the bank may decide to reverse the payment and you could lose your money. Insist on additional proof of identity before accepting a cheque for payment.


PayPal is seen by many people as being safe and is often the preferred method of payment for a customer. From the customers point of view, the ‘buyer protection’ offered by PayPal makes this a ‘feel safe’ method of payment.

If a dispute arises, PayPal will negotiate between the merchant and the customer to achieve what they consider to be a fair resolution. Another advantage to the customer is that the store never sees the customers payment details. This means that a customer can pay by credit card and only PayPal has the details of that card. The store is made aware that a payment has been made with a credit card, but has no further details.

PayPal allows payments to be made to a merchant in two ways. Firstly a customer can use a credit card as described above. Secondly a customer can use a PayPal account which either has a sufficient balance to make the payment or is linked to a bank account/credit card from which the payment can be sourced.

Using a credit card

When a sale is made and the payment is by credit card, the store receives an email advising of the payment. In this case the buyer is protected if the merchant fails to deliver goods or services matching what the customer had purchased (and the customer can provide sufficient evidence). The seller is offered NO PROTECTION from the credit card being misused, as in the case where the card details have been stolen and used without the card owners knowledge. The card owner tells their bank to stop payment, this is known as a chargeback. PayPal will ‘act on your behalf’ but invariably they refund the bank after garnishing the disputed amount from your PayPal account.

In this situation the store owner should make an extra effort to ensure that the order and customer are legitimate.

Using a PayPal account

When a customer pays for their order using a PayPal account (not a credit card via PayPal) the buyer and seller are both protected by PayPal. The email advising payment will include a declaration that the seller is eligible for ‘seller protection.’ Should it be found that the PayPal account had been misused by a third party, the seller is unlikely to suffer financially as a result, with some big IFs.

IF the goods are not shipped to the address on the payment advice sent by PayPal at the time the sale occurred, you will not be able to claim seller protection.

IF you can not provide proof of delivery to the address on the payment advice sent by PayPal, you will not be able to claim seller protection.

Signs a customer may not be genuine

  • The use of free email accounts. Hotmail and G-mail are two of many free email accounts that anyone can create. Orders from one of these email accounts are much more likely to need extra attention.

  • Their name and address is not in the phone book. Some people don’t have home phones or may have unlisted numbers, but again take extra care.

  • They give an unlisted mobile number. Search using a reverse lookup site and Google, again take extra care.

  • They want delivery to a P.O.Box or a delivery address different to their home address.

  • They paid with a credit card. (no seller protection)

  • The IP address the order was placed from is not from the same area as the address they gave.

None of the points above (either alone or together) mean that the order is not genuine, but they are all factors that should make you pay extra attention to the sale.

The more of the above points that are true, the more suspicious and careful you should be.


Fraud is becoming more and more of a problem and at the end of the day there is only one loser.

It isn’t the customer, it isn’t the bank, it isn’t PayPal.

It’s YOU. The merchant.

  • When you are in doubt, ask to customer to provide proof that they are who they say they are.

  • All of the clients I have requested further information from have been happy that I made the effort to check.

  • Every one of them was able to provide what I asked for, and there were no issues with the sales.

  • The ones who ‘promised’ to send me the extra information I requested and never did were all scammers and in each case PayPal later alerted me to “unusual account activity” and a chargeback was instigated by the account owner.

If you are in doubt that an order is above board you may be better to cancel it.

It may be better to lose a little profit, than a large outlay for stock you just handed to a scammer.

Personally, I’d rather not give them the satisfaction.


Stopping The Scammers

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