Several online vendors utilize multiple payment options to enhance the chances of making a sale. Offering several payment options is a very good idea if you're selling products/services online, but beware, processing your own credit card payments can be dangerous and the potential to even be financially crippling to the new merchant.
Accepting payment methods such as PayPal offers peace of mind through security checks that assist an online retailer in ensuring the payment was authorized from the financial holder, such as offering an address confirmation and a verification process to ensure that PayPal users are legitimate. This service can be very helpful, however PayPal is typically more expensive to use on a per transaction basis, not to mention losing additional funds on international currency exchanges can be costly to the average PayPal user. I've personally used PayPal for several years and they've changed policies, website features, fund holds and more way too many times to keep confident in using them as a sole processor. I've also used other credit card processors. The per transaction rates are typically more aggressive and if you find the right one, the fraud prevention tools are pretty good for the most part, however dealing with a large amount of fraud on a daily basis, one must keep several points in mind when processing cards directly.
Below are some good tips to use when processing credit card payments on your own to ensure your odds of shipping a fraudulent transaction and receiving a credit card charge back are minimal.
1. Never ship to a shipping address that doesn't correlate with the buyers billing address. Ensure the credit card processor you're contemplating offers an address verification service (most do). They typically have a legend of letters (sometimes fairly random), which provide detail regarding the order. For instance, when an order comes in to one of my websites I can clearly see if there's an address match. If not, I immediately void the transaction.
2. Always track IP addresses and check each order. Most online processors clearly show the buyers IP address. Verify that the buyers IP address originates from an area in which you ship to. Also confirm that the IP address used to place the order matches the IP address used to create an account with your website. If possible utilize fraud prevention tools that your processor may offer to block high fraud countries. I'm not going to get in to the highest fraud countries, that information is readily available online, do a quick Google search. I can say that 90% of the fraud that has come through on my websites originate from either Africa, or Venezuela.
3. Void a transaction as soon as you possibly can if you suspect fraud. Voiding a transaction before it has batched will save you a ton of money int he long run. Once a payment batches (charges the clients card), there is a processing fee. The fee ranges for online transactions, dependent on your product, market and risk to the processor. Voiding a transaction will typically still incur a small per transaction fee, but it's much less than an actual processing fee. My transaction fee is $0.10.
4. Call your customers to confirm orders if you have any suspicion. If the customer hasn't provided a phone number, email them and request that it's mandatory to provide a phone number for shipping purposes. This can help you qualify who you're dealing with by having a quick conversation to verify the contents/shipping address of the order.
5. Clearly display a fraud warning on your checkout pages. I've found that this can cut down on fraudulent transactions by at least 50%. One of the notices I use goes something along the lines of "All fraudulent transactions are immediately reported to authorities for investigation. Fraudulent transactions will be prosecuted to the fullest extent of the law." I also clearly outline that absolutely no orders will be shipped to addresses other than the card holders billing address for any reason. These tactics can greatly reduce fraud and wasted time.
After years of processing payments through PayPal and other processors, I must say that the above has been acquired through several experiences of tough learning. Create rules and abide by them. If you have a bad feeling about a transaction, take steps to confirm who you're dealing with. If you can't effectively do so, don't ship the order.
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