This year, thousands of consumers worldwide will use the Internet to make their holiday purchases. Online merchants are looking to capture shoppers and their money. Holiday season 2000 will tell the world whether e-companies understand the “Rubik’s Cube Syndrome.”
Similar to the Rubik’s cube, there are three levels of understanding companies should have when they decided to sell via the Internet. First, all sides should be examined for the problems and solutions to the puzzle of profitability. Second, e-companies that attempted to solve the puzzle themselves but realized assistance was needed to succeed. Similar to people that bought the book to assist in solving the Rubik’s Cube, these companies required assistance from qualified companies to assist with problems and strategies. Third, most companies tried to change sales strategies, personnel, and business models — much like the people who kept twisting the Rubik’s Cube in hopes to get the colors matched up.
During the 1999 holiday season, online merchants faced problems attempting to sell their merchandise online. Fulfillment was the number one problem. At the same time, people were creating more sinister stories. The theft of thousands of credit cards numbers from different online merchants that did not have the proper security measures to protect customers’ private information. Statistics show over 2 million credit card numbers were compromised when corporate systems were hacked.
During the last holiday season, I authored an article concerning credit fraud. Few took seriously the ever-growing problem. Most companies were concerned with sales. Few concerned themselves with protecting sales from e-commerce fraud. Fraud has — and will continue to cause – online merchants problems until they take proper precautions.
The government has stepped-up efforts in fighting Internet fraud. Large e-commerce companies have admitted credit card fraud is a problem. An E-Commerce Times article stated that Microsoft spin-off Expedia.com reported quarterly losses of $4 to $6 million in losses to cover fraudulent credit card purchases. The problem of attempted and actual credit card fraud is getting worse for online merchants. Online merchants face 12-times more fraudulent activity than brick-and-mortar operations.
Credit card companies have tightened rules for online merchants who accept credit cards. Many companies will be unable accept credit cards because of new rules. More companies will join this growing number following this holiday season if not properly prepared. Some companies have halted online business because of their inability to stop online losses and their inability to accept payment by credit card.
Most companies still rely on “guessware” software to tell them the validity of an online order. Few online merchants have taken the steps time or hired the personnel to take the steps needed to lower the risk of losing sales. If your company is relying on “guessware” software or the traditional address verification system (AVS), a few minor precautions have been taken to protect online investments. “Guessware” software is programs used to assist online merchants with verifying information provided by the purchaser. It places different values on information supplied during ordering. Points are assigned for discrepancies such as providing a wrong phone number for an area or stating you are a US citizen but your Internet Protocol Address (IP) originates from Europe.
The Internet is changing the way business is done. The speed of the Internet has replaced traditional selling methods. As a result, loss prevention has taken on a completely new meaning. It is no longer necessary for a thief to come to your building to steal or harm your business. With the Internet, today’s new age thieves can get your company to deliver goods to any address. Soon, there will be no need for thieves to fence their stolen goods in dark alleys or smoky backrooms. Most of the stolen items will be sold through public auction sites or chat rooms. Until more secure verification techniques are enabled, making an online purchase is as easy as obtaining credit over the Internet. The process is simple — use someone else’s credit information, obtain a credit line, and start placing fraudulent orders. Total time needed — less than five minutes.
Most businesses mistakenly believe that there is little risk in pursuing sales in a business-to-business (B2B) environment. Eventually, a breaking news story will report the theft of tires, batteries, or even engines from a B2B merchant. New age thieves can order a boxcar full of lumber and have it delivered to a location of their choice with stolen documents and credit information. Although business-to-consumer (B2C) sales have a slightly higher loss rate than B2B sales, the higher price merchandise is found in B2B. Whether your company is developing a B2B or B2C strategy, take the security measures to protect online investments. If new B2B companies do not believe online theft happens, the best example is a stolen car hidden in a shipping container at the docks waiting to go overseas.
As companies consider selling goods and services via the Internet, someone must make sure there are tools and training opportunities in place to protect and assist in the apprehension and prosecution of online thieves. Loss prevention specialists with online expertise are very rare. Where will this new breed of employee come from? If a company employs loss prevention specialists for brick-and-mortar protection, they should start learning what the Internet is and how it might affect losses. If a company does not employ loss prevention specialists, a suggestion is to use a department to protect assets and accounts, and the credit department is best suited. From the directors to the newly trained credit specialists, their ability and desire to protect company assets is unmatched.
Articles state the credit manager’s future role will not only diminish but may completely disappear. These individuals were taught to ask the tough questions and make the hard decisions. When working with the Internet, questions are tougher to answer and the decisions are more difficult to make. Credit managers look beyond the sale of goods and services. Credit managers protect the sale. The skills needed to protect online sales are now being developed. Traditional ways of verifying credit will be but a memory, as high-speed approvals become the norm. High-speed approvals mean higher risks for companies. Credit managers who adapt to the Internet will become invaluable resources for their companies. The largest companies with in-house loss prevention departments will need the credit department expertise when beginning Internet sales. Never before has there been a greater need to combine the expertise of granting credit and preventing loss.
The e-commerce explosion has created new ways to do traditional jobs. Because of this, credit managers and loss prevention specialists who wish to invest the time and effort to re-educate themselves can be at the forefront of a new generation of employees that companies will employ.
Whether your company pays for training or education, the time to start learning about online theft is now. Begin exploring the Internet for fraud related sites. Subscribe to free newsletters to get up-to-the-minute reports on all types of fraud and Internet security problems worldwide. Allow employees time each day to navigate the Internet and keep current with the latest news. The time invested in learning about Internet security will save companies more than wages being paid. Take as many seminars possible. Not only are the seminars on Internet fraud insightful, but also they provide an invaluable opportunity to network with other Internet specialists.
A great difficulty in managing Internet Security is un-learning the way credit and loss prevention has been conducted. Remember that new age thieves are working at the speed of the Internet, and credit and loss prevention departments must anticipate the moves thieves make. Companies will not be able to stop all the attempts at Internet theft, but they can make it more difficult. Once your company has taken the appropriate steps to improve Internet security, online merchants must understand fighting Internet fraud is a process not a program.
Consumers are taking advantage of shopping online. All over the world, people spend significant time shopping. Think of the Internet as the world’s largest open-air market. Items worldwide can be purchased with a click of a mouse. What once was available to the few, now can be purchased by the many. Some basic personal and credit information, the item is yours within a few minutes. Even the basics of life are obtainable through the Internet. Click and you shall receive.
There are many people and businesses using the Internet to purchase goods and services. Thousands more are exploring the technological freedom to do comparative shopping and purchase from merchants worldwide. Many of these customers will state they worry about having their credit information compromised by some unknown party or company. E-commerce companies are trying to convince the online shopper that their site is secure. It is advisable to take more precautions when giving credit information while making hotel reservations or purchasing items over the phone, rather when ordering via the Internet.
Many e-commerce companies are safe and are beginning to take measures to assure thieves will not obtain your credit information. This extra effort made by companies follows daily articles written about hackers stealing credit information. Some e-commerce companies, such as Digital River, were concerned about security from the day they started managing Internet transactions. Similar to most brick-and-mortar companies, some online merchants found tighter security was needed.
The consumer shares the responsibility to take precautions when ordering online. If you are new to online shopping, the first thing you should do is order from secure sites. An easy way to tell is to look for a padlock or a key on the screen. If the padlock is open or the key is broken, it is not a secure site. If unsure, send the company an e-mail requesting how to secure a transaction. If do not receive a reply, find a similar merchant that offers a secure shopping environment. Use a single credit card for all Internet purchases and make sure to keep track of purchases. Purchase confirmation e-mails should be kept in a special e-mail folder. Use one piece of credit information for all purchases. Make sure to use only the billing address on the credit card statement. Using consistent information will assist the merchant in verifying and fulfilling orders.
Treat online purchasing like any new shopping experience. You would not travel overseas and shop at an open-air market without making sure your cash or credit cards were secured. Today, people use the Internet. No pesky sales people, no lines, and you can still negotiate to get a lower price. Find what you want, when you want it. With just a few simple precautions, buying over the Internet can be fun and exciting.