Customers can ensure safe online dealings on Cyber Monday by adhering to the standard rules of online retail: Stick to reputable online retailers; watch out for deals on less reputable websites that seem too good to be true; and closely monitor the credit card used to make purchases for fraudulent charges. But for vendors, the Cyber Monday situation is a little more complicated.

“One of the key things is to try to avoid fraudulent transactions, which not only costs the retailers its product, but costs them a lot of time and money to prevent it and also to track down the unscrupulous types that are playing games with them,” says Greg Smith, president and CEO of Accudata Technologies.

Big-ticket tech items (such as TVs, laptops, and tablets), which are often on sale on Cyber Monday, represent an even greater loss to a vendor than it would otherwise face if the charge turns out to be fraudulent.

And the rate at which fraud is occurring is increasing: From 2010 to 2011, instances of fraud on Cyber Monday rose from 3% to 4% of total transactions. Given Adobe’s estimate of $1.98 billion dollars generated on Cyber Monday in 2012, a single percentage point uptick in fraudulent transactions means tens of millions of dollars wasted.

What can retailers do to combat this? One of the most common methods of preventing fraud for online retailers is verifying a customer’s credit card. But authenticating by credit card has its own dangers, according to Smith. Credit card fraud, along with shipping fraud and account takeovers, make up the three most common types of deceptions on Cyber Monday, according to anti-fraud company iovation.

“Some retailers use social security numbers,” says Smith. “But the problem with using social security numbers as verification is two-fold: One, most consumers are reluctant to give it out; and two, it’s very difficult to validate that that number is associated with the purchaser anyway.”

For retailers looking for an affordable authentication solution, Smith suggests using customer’s phone numbers to weed out fraudulent purchases. “One of the reasons that telephone numbers tend to work well is people know that the retailer could just call that phone number and in all likelihood it will go to the person that owns that phone number,” he says. “So fraudulent use of a phone number generally doesn’t work.”

Accudata Technologies, which bills itself as “an access hub for validating information associated with telephone numbers, cellular numbers and IP locations,” offers its services to online retailers, particularly those looking for a more secure transaction this holiday season. Depending on the level of complexity requested by the vendor, Accudata can verify if a given phone number is real, if the customer’s name on the transaction matches the name on the telephone carrier’s record of the cellphone number, or even if the customer’s home address registered with the carrier matches the order form.

By making connections with the major carriers in the United States with Signaling System No. 7 (SS7) networks, Accudata can send a request to the databases housing the information that a vendor needs to verify a transaction. If a number comes back as unregistered, or with different information than the customer entered, an individual vendor can take a number of actions. Vendors can try to save the deal, says Smith, by sending an email to the customer informing him that the transaction hasn’t gone through and by giving a phone number for its support line.

Customers are already used to filling in their phone number as a required field for an online transaction, says Smith. “So from a consumer perspective, particularly for a valid transaction, they don’t know anything different at all,” he says. “And frankly, it keeps the prices down for things that they’re buying. The fewer fraudulent transactions that go into a particular retailer, the better price that retailer can offer to sell its products.”

And neither customers nor vendors have to wait long for results of the check. For example, Accudata’s verification process “from the time they send it to us to the time we respond back to them, usually takes about 2.5 seconds,” says Smith.

The cost to the vendor for phone number verification is decidedly low. The most expensive check a retailer can perform for an individual sale costs 11 cents, and the price can go down to 4 cents for more common verifications. “So from the impact of the overhead for the retailer to validate the information, the change in the margin for them is insignificant. To not do it is a mistake; to do it is a minor impact on the margin for even the lower end products,” says Smith. The CEO says there are perhaps three other companies in the United States with the access to SS7 networks that Accudata commands.

Vendors will likely see record-setting sales numbers again this Cyber Monday, continuing the year-to-year trend. And with instances of fraud increasing alongside skyrocketing sales numbers, “[I]t really makes sense for retailers to take advantage of phone number verification,” says Smith, “because it will save them a lot of money in the long run.”