Chargebacks & Disputes FAQ

What are some tips for protecting against fraud?

Fraud prevention is a must for every merchant. Ignoring fraud or hoping it won’t happen to you can result in disaster for your business. To help protect your business from fraud, read on to learn about fraud and to find out how you can prevent fraud from ruining your business.

What kind of fraud should I be aware of?

All too often, fraud is referred to as friendly fraud, and it’s this misnomer that causes so many merchants not to take fraud seriously. There is no such thing as friendly fraud. Fraud is theft, plain and simple. The correct name for the fraud that you need to understand is chargeback fraud.

Chargeback fraud happens when a customer makes a purchase with their credit card and then disputes this charge and requests a refund from their credit card company. Chargeback fraud has become more common with the rise in card-not-present purchases and the increase in Internet and mobile sales.

As a merchant, you must have solutions in place that work for you to identify fraud risks. In the event that you become a victim of chargeback fraud, this solution will enable you to successfully represent the dispute.

How do consumers commit chargeback fraud?

To better understand how to prevent fraud, it’s useful to know the most common methods consumers use to commit fraud. Be aware of the following fraud tactics:

  • Customer claims the item wasn’t delivered. With the prevalence of card-not-present purchases and online shopping, it has become easy for customers to claim that the item wasn’t delivered and then demand a refund from their credit card company. The reality is that the item was delivered, and now the customer is trying to cheat the system and effectively steal the item.
  • Customer claims the item doesn’t match the product description. Another common tactic is to claim that the product doesn’t match the online description. The customer doesn’t necessarily want to return the item for a refund, rather they want their money refunded and to keep the item – whether or not it isn’t what they wanted.
  • Customer claims they returned the item. In this attempt to steal the item, the customer states that they did return the product but that they didn’t receive a refund from you.
  • Customer claims they didn’t order the item. In this instance, the customer will claim they don’t remember purchasing the item, didn’t authorize the purchase, or don’t recognize the credit card charge.

These fraud tactics are out-and-out theft. The customer is clearly trying to steal your product and get a refund for it as well. This is essentially the modern-day version of shoplifting.

How can I limit and prevent fraud?

It’s your responsibility as merchant to take efforts to prevent fraud from happening. Admittedly, it’s not easy to prevent or stop all fraud from occurring, but with the aid of a few different measures and processes, you can make it very challenging for your customers to commit fraud.

Keep an eye out for these fraud warning signs:

  • High-priced purchases. Be aware of you customer buying habits and be alert to first-time customers who make very expensive purchases. Always review these high-end purchases and take the extra step to contact the cardholder and customer to confirm the purchase.
  • Bulk orders. If a customer orders a large quantity of a specific item, you need to follow-up. Often merchants will ignore bulk orders as a possible fraud risk, but it’s important that you confirm the purchase with the customer and verify that they did intend to make such a large purchase.
  • Different billing and delivery address. While it’s not uncommon for customers to buy gifts online and have them delivered to a different address, pay attention to the item(s) being delivered to an alternate address. It is worth your while to confirm the delivery address with the customer before approving the purchase.
  • International shipping. Be alert to purchases being made from foreign countries that are then delivered to another country or alternate address. Often customers will use a false purchase location, or this can indicate the customer is using a stolen credit card.
  • Incomplete customer information. For every purchase, you must collect the customer’s name, address, phone number, email address and full credit card details. Ensure your customers that this information is mandatory.
  • Multiple orders made very quickly. This can indicate the customer is using a stolen credit card. Contact the issuing bank and ask the bank to confirm the validity of these purchases.

Make sure you’re doing the following to limit fraud:

  • Be available. Often, customers will claim they couldn’t reach your customer service team or that you didn’t respond to email enquiries. Make sure it’s easy for your customers to contact you, and encourage them to contact you with any questions.
  • Keep clear records. Ensure that you are keeping detailed records of every transaction. This includes customer contact details, customer purchase history, delivery receipts, and proof of credit card authorization.
  • Obvious refund/return policy. Make sure your refund/return policy is clearly displayed on your website. Often, merchants will display their refund/return policy during the purchasing process and require the customer to acknowledge the refund/return policy.
  • Confirm the purchase. Always confirm the purchase with an email. This email should contain the full invoice details, including a list of purchased items and the date/time of the purchase. When the item is ready for shipment, send a second email that provides shipping details that includes a tracking number.

While we’d like to tell you that fraud is 100 per cent preventable, it simply isn’t. However, you can take measures to prevent fraud and maintain processes that make it very challenging for thieves to commit fraud.

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