Protecting Your Business from Chargeback Fraud: Quick Guide

E-commerce is worth 2.7 trillion dollars as of now. Naturally, capitalization of this size attracts vultures of all sorts: e-scammers, dishonest customers, and so on. False chargebacks have been a pain for online retailers for a long time now.


False Chargeback: The Origin of Evil


False chargebacks have appeared circa the early 2000s. It was the reason why Visa got sued by Paycom in 2003 for making it ‘an especially vulnerable target’ for online fraud. So, chargeback prevention services exist for a reason.


This is how it works. A client makes a purchase from your store: let’s say an online clothing boutique. Naturally, they use a card like Maestro or one of the money-transfer platforms like Skrill or Payoneer.


And once a parcel arrives at their door — be it a pair of sandals or evening dress — they instantly issue a chargeback. The bank has to respond and forces a refund. As a result, the crooked customer gets to keep both: money and your goods.


But there must be a good reason to request money back, you might say. Well, the following excuses are used by the fraudsters the most:


    • I never got my stuff! Even though it arrived perfectly on time and in irreproachable condition. There’s physically no way to check if the customer tells the truth or not.
  • I was bamboozled! This implies that your service/item doesn’t deliver what’s originally been promised.
  • It’s a scam! The purchase wasn’t allegedly made by the card-owner. Someone else bought the stuff using their card.


These are the top three excuses. Scammers may come up with alternatives, but the core idea is always the same: it’s only your fault it all happened.


Damage & Losses


Chargebacks are quite annoying and also quite dangerous. If you deal with them often, your business will lose a substantial amount of revenue. Count the losses yourself:


  • Goods. Your merchandise won’t return.
  • Refund. You’ll have to cover the full price.
  • Logistics. Shipping costs will be a waste of money too.
  • Extra fee. Your acquirer will make you pay the chargeback fee.


These are the ‘short run’ losses. But what is going to happen in the long run? Well, if your business makes it to a certain level of chargeback ratio, you will automatically have to pay higher processing rates. That is of course, if they don’t cancel your merchant account at all.


Plus, it’s pretty bad for your brand’s reputation. Fraudsters will do anything to pull their tricks off, which includes badmouthing your company. And it may naturally scare away good, honest customers.


Strike Back: Ways to Prevent False Chargebacks


What can save your biz from the plague of false chargebacks? Winning the chargeback disputes is the only way so far.


But it’s not that easy — it requires convincing proof that your business doesn’t play dirty, that you serve verified clients only and also that you have plenty of evidence for all that.


So, here are the best strategies to follow:


  • Record everything


Your first proof of innocence is a record that shows that the money transfer was legitimate. In other words, there was no alleged card scam, hacking or some weird mumbo-jumbo technical glitch that somehow bought stuff online.


What to do. Collect all data possible: confirmation emails, invoices, electronic signatures, and so on. Make sure that a customer also leaves their signature once the goods are delivered to their porch. The more of this evidence you have, the better.


  • Know your processor


The success of a chargeback dispute also depends on whose services you employ when it comes to non-present-transactions. It will help avoid false chargebacks at all.


What to do. Do business with reputable payment processors only. The best of them offer anti-fraud tools, such as possible scam detection. Plus, the vendor protection includes such extra remedies as AVS — address verification services.


  • Social media


Stick to the Know Your Client policy. Especially if you think a purchase might be fishy and some details — like the billing address and the credit card issuer — don’t match.


What to do. It’s okay to request a person’s verification through the likes of Facebook. Sometimes, credit cards do get lost, stolen or hacked. And the real card-holder may not be aware that he’s buying a motorboat or collection of porcelain owls right now.


  • Work with experts


Increase your security and outsource chargeback prevention to the expert team. You can’t patrol around your business day and night, searching for the scammers.


Besides, time means everything in this case. The faster you begin a dispute over an unfair chargeback, the bigger the chance for success is. And if you can be caught off guard, the security experts will be ready any moment to contest a false dispute.


Wreck the Chargeback


Follow our tips and your business will be immune to false chargebacks, at any moment.

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