With the COVID-19 pandemic causing large-scale work stoppages, many Filipinos have turned to online businesses to augment their incomes. From selling clothes and food to offering online services, these ventures have become popular in households. But with their growth in popularity, online sellers have also become a prime target of fraudsters and scammers. To help you, here are some ways to guard your online business from these malicious people.
Bogus buyers
Bogus buyers are one persistent issue that an online business often has to deal with. These are the people who initiate a transaction with you only to back out the moment you are ready to ship an item. They may also reserve the item for long periods of time, blocking out other buyers who could have bought it already.
Dealing with bogus buyers
One way you can spot a bogus buyer is by the way they communicate with you. Since these sham buyers are not interested in purchasing, they are slow to respond after the initial inquiry. Another red flag is the long list of excuses as to why they have not yet finalized the transaction.
Since most small online business transactions happen on social media sites like Facebook, you can quickly check on the buyer’s given profile. You should also search their given address online to see if everything matches. If you are a member of an online selling group, ask for information about the particular buyer and see if anyone will vouch for them.
Buyer scams targeting online businesses
While bogus buyers are often just there to annoy you, scammers can do a lot more damage to your online business. After all, their goal is to con you out of your products. So be ready to deal with them.
Non-payment scams
One scam that you might encounter is the non-payment of items bought. This is fairly common in the online business scene since the transaction only happens through digital means. Here, the fraudster will request you to ship the item while promising to pay once they receive it. This tactic can easily fool new online sellers who have yet to get used to the process.
A more sophisticated version of this scam is the chargeback. This targets online businesses that accept payment through credit cards. Here, the fraudulent buyer will authorize payments through their cards before requesting the item to be shipped. Once they receive it, the scammer will make a refund request to their credit cards and claim that they did not receive the item.
Another common scam that targets online businesses is the return scam. This is usually done on online shopping sites like Lazada or Shopee and abuses the return policies these sites have. In this one, the scammer initiates a return request after receiving the item and making a payment. They would claim in the request that the items they receive are either defective or not the same as advertised. Once the request is granted, you have no choice but to either refund the money or send a new item to the customer.
The overpayment scam
Another buyer scam present in online marketplaces is the overpayment scam. In this one, the buyer will offer you a price that is larger than what you have listed for the item. The catch is that they will request to pay through cashier’s check or money order instead of the site’s regular checkout process.
Once you agree, the scammer will send you fake payment details with an amount that is larger than the initial amount you have agreed with. They will then request you to return the excess amount through untraceable means like wire transfers.
The scam happens fast that you don’t have the time to verify whether the transactions are legit. Also, payment methods like checks can sometimes take weeks to be cleared. By the time you realize that the transaction was fake, the scammer is already gone with your money.
Protecting against fraudulent buyers
One of the ways to protect yourself from fraudulent buyers is having a cash on delivery, or kaliwaan option for the transaction. Here, you deliver the goods to the buyer and they hand the payment over directly to you. Be sure to coordinate with the buyer before delivery to ensure that they will make an appearance.
Note that this method is feasible only if the delivery area is near your location. Alternatively, you can establish a meetup point where you do the transaction. In both cases, there’s the risk that the buyer refuses to accept the goods. But you still don’t end up getting scammed for the item.
If your online business relies on digital transactions and shipping, have a payment first policy in place. This can be either a partial or full payment policy. For the former, you should have a definite grace period as to when the balance should be paid before the item can be shipped out. Non-payment of balances will then result in the forfeiture of the downpayment customers paid.
To protect yourself from returns-related fraud, document the products that you ship out. In particular, you would want to take pictures of the goods before they are packed and how you packaged them. Some fraudsters might still try to trick you but will have evidence against them.
As a last reminder, always take note of the protection policies that online marketplaces like Shopee offer. These will give you some fallback in case you encounter fraud. You should also actively report such cases to help these sites craft better policies.
Lending scams targeting online businesses
Aside from unscrupulous buyers, online businesses also need to be careful of various lending scams. These target fledgling businesses looking for funding, conning them of the meager capital they have. The following are some of the tactics that they use to attract victims.
“Guaranteed approval” scam
This is the most common strategy that shady lenders use. Here, they claim that your loan request will be approved within a day. Additionally, these scammers will claim that you won’t need to go through a credit check to be approved. Online, these scams typically come in the form of “one-click” lending websites.
In exchange for that supposed quick approval, scammers will make you agree to unfair repayment terms, including:
- High interest rates: The rates can sometimes go up to double the usual ones offered by legitimate lenders.
- Undisclosed fees: Shady lenders often spring up undisclosed fees when you agree to apply for the load, claiming that this will make applications faster.
- Unfair collateral: The collateral is often of significantly higher value compared to the loan itself. Some might even require personal data as collateral for the loans.
- Untraceable payment schemes: These sham lenders often require victims to pay using methods like wire transfers or gift cards. Such methods are difficult to trace, leaving you with no way to recover your money.
Since many people are looking for quick ways to start their online businesses during this pandemic, they can easily fall prey to these schemes. Once you get into this one, you will find yourself losing more money, making your business unsustainable.
Unsolicited loan offers
In this type of loan fraud, the scammer masquerades as a legitimate lender and sends you a loan offer. This might come through either phone or email. Some will even reach out to your through your online business page. Once you cave in on their offer, you can encounter similar terms as above.
While you might think that this scam is easy to ignore, their operations are rather sophisticated. In one case, scammers used illegally acquired information to determined businesses that have already had their loans denied. This makes them more susceptible to accepting offers from any lender in their time of need.
Protecting against fraudulent lenders
To protect your online business from predatory lenders, you should always hold back and inspect the offer first. Some of the tell-tale signs to watch out for are:
- No physical address: Legal lending companies are required to provide an address for a physical office. If you are unsure that their given address is legit, you can always do an online search.
- Registration information: The Securities and Exchange Commission provides a list of legal lending companies that you can always check for verification.
- Unavailable loan terms: Lenders are required to disclose their complete terms for the loan applicant right at the start of the application.
- Offers too good to be true: This requires you to temper your expectations. Ask yourself whether the initial load offer is fit for your needs or if it is too big.
If you see these signs, it would be better to back off and find a legitimate lender. Remember that your online business will have better ground to stand on if it is funded from reliable sources. This also helps keep your credit history clean.
Keep your online business safe
With all the fraudsters lurking around, starting an online business during the pandemic can be scary. But do not worry. By following our tips here, you can safeguard your goods and ensure successful transactions. Start today and earn extra while at home.