Study Guide

PayPal Certified Developer Program Study Guide March 2008 27
Internet Security and Fraud Prevention
Reducing Exposure to Fraud
2
Reducing Exposure to Fraud
It is possible to significantly reduce your exposure to fraud. There are essentially three levels
of exposure to fraud on the internet: the individual transactions, the payment gateway account,
and the merchant network. Protecting your business from fraud requires that you address each
of these levels in an integrated manner.
Transaction Level
Ensure that each transaction you accept and process is valid. You should also be careful not to
deny suspicious transactions that are actually valid.
Authenticate buyers when possible. This includes understanding who your repeat
customers are and keeping lists of repeat customers who have legitimately transacted on your
site. Make sure all customer information is encrypted and stored safely. Also, take advantage
of MasterCard® and Visa® buyer authentication programs to authenticate customers and
reduce your liability.
Screen orders for fraud patterns. There is a wealth of information associated with each
transaction that can help you understand the risk level. To effectively manage all the risk
information associated with a transaction, it is important to use a rules engine. A rules engine
automates the process of transaction screening so that you quickly fulfill orders for good
customers and proactively block risky orders. PayPal Fraud Protection Services allows you to
cost-effectively deploy a rules engine as well as benefit from PayPal’s continuously updated
lists of high-risk indicators.
Review suspicious transactions. Finally, review each transaction that is suspicious to make
sure you are doing business with a legitimate customer. Online merchants today reject 5% of
all transactions because they do not have the time or information to determine whether a
suspicious transaction is actually a good one. PayPal Fraud Protection Services allows you to
Customer Base Potential Risk
International It is difficult to validate the address or identity of foreign buyers,
and it is more difficult to investigate and prosecute fraudulent
activity from an overseas source.
Sales Season Potential Risk
Heavy proportion of fourth quarter sales Criminals know that you have limited time for fraud protection
when sales volumes are high. That’s why internet fraud triples in
the fourth quarter.
Special promotions Criminals watch for special offers. They know that you have
limited time for fraud protection measures when sales volumes
are high.
T
ABLE 2.1 High Fraud Risk Quick Reference