If he had it his way, Robert Ramstad would be selling ultra-thin latex sheaths all across the free world.
Practically speaking, he could do it, too.
As owner of the domain name condom.com, Ramstad has been selling condoms and assorted birth control paraphernalia over the Internet since 1994. Through his Western-themed online store, Condom Country, he had originally planned to ship his latex and polyurethane wares pretty much anywhere.
But so far, one problem has gotten in the way of Ramstad's scheme to dominate the global online condom trade. He often doesn't get paid.
"For us, the biggest issue is fraud," said Ramstad, who estimates that fraud rates for international transactions are 10 to 20 times higher than for domestic transactions. In most of those cases, it's from the same countries.
To stem the tide of fraudulent purchases, condom.com simply stopped taking new credit card orders from certain countries, such as Russia, Serbia and the Baltic States, where incidents of such orders have been the highest.
"Some of the countries that have really high fraud rates are countries that could really use our products," he said.
However, as a home-grown business operating on a shoestring budget, Ramstad realized he couldn't afford to cover the costs of unpaid orders.
Condom Country isn't the only company taking such steps. As Internet use expands across far-flung corners of the globe, and anti-fraud enforcement remains lax in many countries, online merchants of all stripes are finding themselves hard hit by fraudulent orders from overseas.
"What a lot of merchants do is they just start red-lining certain parts of the globe and not doing business in certain countries," said Bill McKiernan, CEO of CyberSource, which makes software that companies use to rate the risks of individual credit card orders.
Part of the reason online merchants are so wary of phony credit cards is that they're more liable for losses than their offline competitors. A traditional store that accepts a phony credit card presented by a customer in person typically doesn't get charged by the credit card company for the fraudulent purchase -- or it pays a reduced charge.
Credit card companies believe that purchases made in person are not as risky as those made online or over the phone; therefore, the companies assign more liability to websites and mail order companies that conduct credit card transactions.
That's why it takes only a few fraudulent orders for those companies to enact tough measures.
Lauren Battista, CEO of fashion site DesignerOutlet.com, had to shoulder the costs of only a few fraudulent orders, for things such as cashmere sweaters and Ralph Lauren jackets, before she got tough. Now she runs each credit card transaction through a rigorous verification test.
If she's not comfortable with the results, she tells the customer to send a check -- which must clear before the order is shipped -- or to wire cash.
Other merchants refuse to accept certain orders, even before shipping address and credit card data gets punched in.
T.J. Walker, who runs the software retail site SoftwareSolutions.net, and an online fraud protection service, AntiFraud.com, has stopped accepting orders from anyone with a Web-based e-mail service such as Hotmail.
The problem with those services is that anyone can sign up for them without having to provide true information about who they are or where they come from.
"There's absolutely no way to track down their true identity," Walker said.
Even services that provide authorization for a credit card number aren't foolproof. The reason, Walker says, is that many criminals use computer programs that copy the algorithms that credit card companies employ to generate new cards. Through these programs, they're able to create phony credit card numbers that are accepted as valid.
The highest incidences of online credit card fraud come from a few hotbeds for computer-assisted crime, in particular Russia and other countries in Eastern Europe, McKiernan said. Many other nations, such as Japan, are relatively low-risk locales for online fraud.
Despite merchants' increasing awareness of the risks, McKiernan believes the rate of online credit card fraud is still on the rise. That's partly because it's tough to crack down on a crime when the victim and the perpetrator are on opposite ends of the globe.
The retailers' dilemma has spurred a proliferation of software and other tools that can help ferret out ersatz orders. CyberSource, for example, runs a software program that analyzes each credit card order and then assigns a score to it, to indicate whether it's risky to accept.
The categories for analyzing risk include such obvious criteria as where the order is coming from and whether the address for shipping matches up with the address of the card holder. There are also some less obvious considerations: An order placed at 2 a.m. local time, for example, is considered riskier than one placed at 2 p.m.
Still, the categories that can be considered high or low risk vary among retailers.
At DesignerOutlet.com, for example, Battista has learned to turn a cautious eye toward express orders. Customers who order a large quantity of designer clothing, then want it shipped overseas as quickly as possible, are more likely than others to pull a scam.
Back in Condom Country, however, rush orders are more apt to be taken at face value. Ramstad still recalls with a mixture of guilt and amusement an e-mail from a customer who waited for days for a shipment of condoms.
"We got your order, and it came quickly," the customer wrote. "But I guess it wasn't quickly enough. We are now expecting a child."
