Chargeback Fraud, Friendly and Not So

Chargeback Fraud, Friendly and Not So

If you run an online business and suddenly dream of chargebacks, you are likely to wake up in a sweat. A chance that the money you have received suddenly returns to the customer is not that neglectable. And often it’s a result of fraud. Well, the first rule of chargeback prevention is to never give reasons for “righteous” chargeback, always ship physical goods in time and pick the right parameters. But when it comes to fraudulent claims, you better understand their genesis and choose the right prevention methods.

A Friend in Fraud Is a Friend That’s Odd

An alliterative “friendly fraud” is a situation when a good-intentioned customer claims a chargeback for quite an innocent reason. For example, they can forget they have bought something online, or they don’t recognize the order in the description. It also happens that a family member used another one’s card to make a purchase and didn’t inform them.

While there’s no criminal intention in this sort of chargeback, it still impacts your revenue. So you better take steps to prevent it as following:

·      Write an informative descriptor for your store. The alert the customer receives should contain your name, the amount paid, the name and a brief description of the purchase, with key parameters included.

·      Make sure you ship purchases in time and notify the customer about that. Track the package, so you will know and be able to prove that you have shipped it and the customer has received it (if they have). 

·      Make it easy to contact you. There should be a bot that customers can contact, incase you cannot afford a 24/7 human support. Provide your business email, your phone, or messengers for customers to get in touch.

If you follow these rules, it will be easier for customers to understand the situation and for you to explain it to them as they contact you.

Criminal Fraud: Customers Are Not Who They Seem

Along with friendly fraud, there are cases of real crimes when purchases are made with stolen cards or credentials. In these situations, the legitimate card owner can claim a chargeback being quite right about it: they did not make these payments. But still, it’s you who loses in the end, and you can only hope your losses are refunded when the criminal is caught (maybe never).

To prevent these accidents, though, you can just decline suspicious payments. There are ways to detect whether the card has been stolen that provide high probability of success. To rate the potential purchase, the antifraud systems use device fingerprinting.

Any card number has a lot of metadata connected to it. What devices does the owner usually use it on? What’s the data carrier? At what time of day do they usually make online purchases? Where are they located at the moment? What categories of goods do they prefer? If some of the answers don’t match the regular patterns, it’s a reason to consider declining the transaction. Specialized AI-powered systems make decisions in seconds. All you have to do is connect one to your payment gateway.

Keep Customers Checked, Fraudsters Double-Checked

Both friendly fraud and criminal fraud should be taken care of. Though they require a differentiated approach, it’s all in your hands. The services you can use to prevent chargeback fraud are affordable and can save you from bigger losses.

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