Brett Boshier is the managing director of Sydney-based Mattatech, an online company that exports computer equipment worldwide. Recently Mattatech was forced to completely overhaul its e-commerce system, after estimating it would lose up to AU$40,000 on its real time credit card facility, through a process known as chargebacks, where a bank will withdraw money previously deposited as a result of a fraudulent transaction.
Online fraud is an increasing problem in the new economy. A recent survey by financial services company KPMG Forensic found an estimated AU$30 million lost to -international" fraud.
According to Boshier, there are two main credit card scams used to defraud Internet retailers. -First, stolen cards were being used and then authorised by the bank. When it was discovered they were stolen, we had our merchant facility suspended," said Boshier.
After the facility was suspended for two weeks, his bank - St George - terminated the service using a clause in the contract that allowed it to pull the plug on the contract at any time, for any reason.
Boshier claims St George gave no reason for the termination, and he consequently moved all his accounts to National Australia Bank.
-The system offers merchants absolutely no protection," he said.
Another common method by which people commit credit card fraud is to use a legitimate card to order goods, and then tell their bank they didn't place the order or the goods hadn't arrived.
-They sign an affidavit that they didn't receive the merchandise, and the banks take the money back out of the account," said Boshier. -It's then up to the merchant to provide the proof to the banks that the merchandise had been sent. We have all the records here but the amount of proof they require is horrendous."
Boshier said he recently spent three hours on the phone to the United States in order to get a chargeback reversed.
Mattatech should survive this experience thanks to stringent new online transaction guidelines introduced by the company, according to Boshier.
-We've written a whole new fraud policy. It's going to be hell for customers ordering now because of all the information we need to get to prove that we're innocent," said Boshier.
Mattatech now requires overseas purchasers to sign a handwritten note and fax it to the office, so it has written proof and the customers' signature. Then a follow-up call is made, just to be sure, Boshier explained.
The company has also taken the drastic step of reducing the number of payment methods it offers. -We aren't accepting Visa or MasterCard for any overseas transactions," said Boshier. -We'll only accept direct transfer or American Express."
This is because American Express has a policy of no chargebacks, according to Boshier. -Once American Express has authorised a transaction, if it's fraudulent they investigate themselves," he said. -You don't even have to provide proof."
In a further attempt to stem the tide of online credit card fraud, Boshier is creating a Web site housing a database that contains fraudulent transactions experienced by merchants. Businesses can become members for a nominal fee and have access to the fraud records, which they can check before they dispatch goods.
-There are other services but they cost a fortune," said Boshier. -We are thinking of purchasing a database and making it available, but we're not sure of the legality." He said the project has the backing of the Police.
