Internet fraud is out of control. Fraudulent orders commonly originate in countries where the credit card fraud rate is unacceptably high or where you do not do business. Here is how to use IP addresses to check the geographic location of the person who placed the order.
A check of the IP address of every user who places an order should be a requirement before any order is processed and shipped. The billing or shipping address is not always reliable because smart thieves set up phony addresses and shipping locations in a merchant’s home country to avoid suspicion. They may be placing the order from Nigeria, but all the information in the order indicates a USA buyer. Large networks of overseas thieves have products shipped to drop locations or freight forwarders where they are shipped to other locations.
If you sell and ship products internationally, the verification of credit card information is impossible in many countries, which always puts those orders at greater risk.
Almost all shopping carts have a method for including the user’s IP address with an order. If the shopping cart you use does not have this feature, add the code yourself of hire a programmer to add the code.
With PHP, the most common dynamic language used on the web, adding the user’s IP address to an order or an e-mail is simple. Just use the following PHP code placed in the script wherever you need the IP address to appear:
An IP address does not typically identify a specific user, but rather is assigned to the local ISP they use for internet access. Blocks of IP Addresses are assigned to countries and are then registered to the ISPs and companies who license them. The IP address must be looked up in an IP address database to determine the assigned location.
We have tested quite a number of IP lookup services and found several to be inaccurate or they could not verify a large percentage of IP addresses. We did find one free service that is consistently accurate. There are others, but this is the one we use.
For looking up a few IP addresses per day, the IP2Location service is free. When you need to look up quite a number of IP addresses, or wish to automate the identification of geographic locations, it would be a good idea to invest in one of the GeoIP databases they offer.
An order should always be scrutinized further if the buyer’s location and the location of the IP address assigned to them do not match. For example, if a billing and shipping address both indicate locations in Virginia, but the IP address indicates the buyer placed the order from California, it could be legitimate, but it might not be. If the IP location of the buyer placing the same order is in Nigeria, Romania, Russia, China, Korea or any of a number of locations in other countries of especially in countries with high rates of credit card fraud, the order is almost surely fraudulent.
Is checking a user’s IP address a foolproof method? Nope. The use of proxy servers can make a use appear to be in a different location, but it might be very difficult for a thief to find a proxy server with an IP address matching the geographic location of the owner of the credit card number they are using.
Using an IP address to verify a buyer’s location can help prevent a large percentage of fraudulent orders from slipping through your processes. It is only one of several available methods that should be used to weed out fraudulent orders, but is is one of the simplest to use.