Fraud Prevention - Virtual & Non-tangible Item Sales

By: Gene Souza

Lets face it. Fraudulent internet purchases is rampant, worse for non-tangible items and in absolute chaos for mmorpg virtual item and account sales. To assume that there is not an abundance of nefarious individuals hacking paypal accounts and roaming the internet looking for their prey would be a catastrophic mistake.
Yes, I have fallen prey to these hungry villains in the past and they have gouged me deeply with their razor sharp daggers. I have learned allot over the past 8+ years. My experiences have enabled me to construct a sound prevention plan. Its implementation has brought my wife and I astonishing results as sellers of Ultima Online gold and Resources and Eve Online ISK on ebay. I carry and use that plan on my website and my wife's website as well
I cannot say that these tips will guarantee anyone the same results but I can assure anyone who applies them that they will have very good results.
First we need to understand that establishing some kind of identity is our goal here. If we do that it will lay to rest many if not all of our concerns. What and how much information we may need from a buyer will depend on certain situations and the information provided with their purchase. Asking for as much information as possible during the purchasing process and informing the buyer what you may or may not do with this information may deter fraudsters from even completing the purchase which will save you much time and grief down the road.



  • PayPals Seller Protection policy for virtual and non-tangible items is a no go
    PayPal is great. I use PayPal exclusively as my payment gateway. They are safe, secure and cheap to use as opposed to using a commercial bank account account to accept credit cards. Sellers for the most part can feel safe because of Paypals Seller Protection policy. The problem here is that we as virtual / non-tangible item sellers is that we are NOT covered by this protection because we are not shipping an item and cannot provide proof of shipping. Security and fraud prevention is 100% our responsibility. There is no online payment gateway which offers protection for non-tangible items.

    If there were then this would be a one line article directing you to that web sites URL


  • Provide confirmed shipping/credit card address
    Although we are not actually shipping an item this is very important. It helps us on several fronts including letting us know... that the buyer knows... their credit card billing address. We cannot view a buyers credit card info on paypal and it is the only way we have of knowing.


  • Call buyer. Require Phone number, Non cellular land line if possible.
    ALWAYS, ALWAYS call a first time buyer no matter how small the purchase. This simple phone call is the single most important step in fraud prevention. It alone will wipe out more than 80% of the fraud.


  • Address and Telephone number match. In many cases we are able acquire an address from a telephone number by performing a reverse lookup on the buyers phone number using bigfoot.com . Keep in mind that bigfoot's data is not always accurate and the address may not match but it will get you in the proximity. This simply means that we need to take additional steps for the confirmation. The phone type is not always accurate either, if you feel uneasy about the transaction and want to be sure of the phone type then I recommend using maxmind.com, it is a paid service but worth every penny. Maxmind will also provide more detail pointing out the anonymous types such as pay phones and store purchased pre-paid cell phones.


  • If it is a land line and that address also matches the paypal confirmed shipping address then we are looking good. Simply make the phone call to make sure that the phones owner is really making a purchase. The phone call is also used to insure that a child is not attempting the purchase.You would be surprised with the number of payment reversals we have had as a result of children hijacking their parents paypal account or Credit card. Cell phones may be acceptable depending on the situation and other provided information. We simply are not able to get enough info on cell phones to concrete any deal.


  • GEO IP lookup. Website owners should capture a buyers IP address and perform a geographical lookup on the IP address. Again I recommend using maxmind to do this. I have tried using many other lookup web sites and have found maxmind to be the most accurate. If GEO IP lookup resolves to the proximity of the buyers confirmed address and phone number then we can assume that this is a valid purchase. AOL IP's will not resolve properly because of their funky proxy system, otherwise maxmind will see through most other proxy systems or at least inform you of it. In this case one may want to be stricter on some of the other prevention measures. In any case if it resolves to a country other than the buyers country you should always refuse the order.


  • Internet service provider email address ( Email confirmation )
    I typically only use this if I am still a little concerned about the purchase and the buyer has provided a cell phone number or the GEO IP LookUp was unsuccessful. Simply ask the buyer for their Internet service provider email address, send them an email and ask them to reply to it. Do not rely on hotmail, gmail, yahoo etc email addresses. Anyone can get those and they serve no purpose in regards to security.


  • Online ID Verification services
    If all else fails you are down to 2 choices. #1 Reject the order or #2 Ask the buyer to register with an online ID verification service. For gamers I recommend using TrustWho.com otherwise try Verisign.com


To date we have not had a single report of fraud on my website RPGBids
Fraud on my wife's web site RPGloft is less than 0.05%.

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