So the merchant is susceptible to losses consisting of the actual cost of goods, shipping charges and, if the situation gets bad enough, penalty fees from the credit card associations or the possibility that their ability to accept credit card payments be revoked. In the frenzy to open businesses quickly and take advantage of this high-tech gold rush, many merchants both large and small have neglected to institute very basic fraud prevention measures that could save their businesses. By definition these three characteristics are the environment experienced on the Internet. The bad news is that most merchants are not doing anything to prevent fraud. The good news is that there are very cost-effective tools available that merchants can employ to prevent this problem without compromising good customers.
Identity fraud comes in many flavors.
They may steal a credit card number and use it to purchase goods that turn into chargebacks when the real consumer disputes the charge or they may create an identity and create a fraudulent card number through use of one of the many number generators that are readily available. And on and on and on. However, even though they steal or create another identity, fraudsters generally change something in the information they supply in the transaction that does not fit and, therefore, cannot be authenticated. For instance they may have goods shipped to a commercial warehouse or they may change a phone number so that the merchant does not call the real consumer to verify an order and find out that it is not legitimate. The key to stopping this is authenticating the identity of the person or company with whom you are transacting business.