How to Minimize Losses from Chargebacks
Chargeback fraud causes billions of losses to e-merchants all over the world. How can one minimize this risk? The best way is to connect the right payment gateway with chargeback fraud prevention features. Here are the ways to minimize the loss your business may suffer because of chargebacks.
What Is Chargeback?
If you as a customer see your card charged for something you did not buy or order, you may decide it’s some crime, or at least a mistake. Then you can contact your bank and request the reversal of the payment. After that, a dispute starts, and quite often it results in reversing the payment; the customer wins, the merchant doesn’t. As a merchant, you can take measures to minimize both fraudulent and friendly chargebacks.
Chargeback is quite a fruitful soil for various sorts of crime. It may truly happen that the customer is a victim of fraud, their card details being stolen. Then yes, it’s their right to claim a chargeback. What you can do in this situation is to decline suspicious transactions. For this, you can:
- Use an intellectual AVS-based filter. The KYC policy means that a card owner provides their details to the card issuer, including their street address. You can check whether the delivery address coincides with it. If not, the chance of fraud is higher.
- Use CVV protection and request the CVV code that is printed on the flip side of the card. If it does not match, the transaction is automatically declined. Thus, you can be sure it’s the cardholder and not someone who just knows their card number.
- Use device fingerprinting. If parameters like the device, OS, browser, IP address, and others don’t match the usual patterns, it can indicate fraud. It can as well be unusual transaction time or mismatching time zone if supported with other evidence. Based on this, you can tell and prevent fraud with high probability.
How to Prevent Friendly Fraud
The most troubling, though, is the case of friendly fraud. It happens when a decent customer requests a chargeback while initially meaning nothing but a fair purchase. To prevent it, you might do the following:
- Enter a recognizable business name and product description in your billing descriptor. Thus you minimize the risks that the customer simply does not recognize you as the payee.
- Keep the prices and the names of your items as stable as possible. If you change the price, make sure the change does not affect the already placed orders. Otherwise, if the charge amount differs from the price on your site, the dispute may be resolved in the customer’s favor.
- If you sell physical goods, track the delivery. So you can prove the item has been delivered and handed, even if the customer denies it.
- Offer other ways of refunding that don’t involve chargeback.
You’re in Charge
And that’s the good news. If you connect the right protection mechanism, you can minimize your losses on chargebacks and save more money than you might expect. Given how popular chargeback fraud gets, it makes sense to get protected.
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