Breaking the Cycle: Overcoming inertia and standing up against Chargeback Fraud Ecommerce is growing and along with it are chargebacks and in particular, friendly fraud. Consumers are becoming more savvy, learning that there are easy ways to cheat the online mobile sales and delivery model. Friendly fraud is increasing at an astonishing rate 33% in 2016 alone.* Friendly fraud occurs when the customer requests a refund for a legitimate charge and then keeps the item in question. U.S. retail sales are constantly fluctuating, but one constant is friendly fraud. For example, the 2014 holiday sales season saw a slump in sales decreasing $442.9 billion in December sales, but the chargeback and friendly fraud charges remained steady. This fraud costs retailers almost $12 billion annually. So how do you as a merchant stay in business with fluctuating and uncertain sales numbers with this ever constant threat of customer fraud? Unfortunately, too many CNP merchants accept this fraud and theft as a cost of doing business and are unwilling to take action. Are you a merchant who is willing to absorb these unnecessary costs or do you want to overcome the inertia of your competitors and stand up to chargebacks? We are here to tell you that you can fight chargeback and friendly fraud. You can realize this lost revenue and you will not suffer from costly time and resource expenditures fighting these unnecessary costs. How Friendly Fraud Happens There is a chance that this fraud is indeed accidental and unintentional. Perhaps the customer doesn’t recognize or remember a charge and disputes it or may it be unclear to them that a family member made a purchase with their credit card. These are just a few honest reasons for how and why friendly fraud can happen. To help limit the amount of friendly fraud you have to manage, make sure you’re doing the following: Have an excellent customer service team: When you have a strong customer service team, your customers are more confident that you will act and resolve their complaints or issues. This proactive customer service team also helps you get to know your customers and establish a strong relationship with them. When your customers trust you, they’re more likely to contact you with a problem, allowing you to resolve it directly, rather than dealing with the lengthy and costly chargeback process. Make sure your customer service team is easily accessible by email, phone numbers, live chat, and social media access. Always triple-check the customer information: whether your customers are buying online, over the phone or in-person, make sure that all customer information is verified and confirmed with the customer. Particularly important for online sales are the Ship To and Bill To addresses, if these addresses are different, don’t hesitate to contact the customer to confirm that these addresses should be different. There are instances of course when customers are buying gifts online and are having them mailed directly to the recipient. One way to verify the gift scenario is to prompt for gift-wrapping when the addresses are different, if the customer declines the gift-wrapping, this should trigger an alert on your end. Be wary of shipping to overseas addresses or to freight companies. Take the extra time to verify the addresses being used before the item is sent out, this can save you a lot of hassle and headache in the long-term. Mandatory signature process: it is well within your rights to ask for your customers to sign for packages upon received. Having a signature verifying that the item was received at the address entered on the order makes it much harder for the customer to commit chargeback fraud. There are many ways to do this, but one of the best methods is with an electronic signature page that the user must sign to receive the items purchased, this data is then stored in a secure database and readily available. Be very detailed: the more detail and information you have about your customer transactions and returns, the better protected you are. In order to prove that a chargeback is indeed fraud, you must be able to provide supporting documentation, or compelling evidence that clearly shows the customer authorized and received the order. Ensure you have vital customer information such as: phone number(s), email address(es), billing address, shipping address, date of transaction, electronic signature records, and package tracking information. Additionally, make sure your customer service team is keeping detailed records of all customer communication. But of course, the friendly fraud we are all concerned about is deliberate friendly fraud. In fact, there is nothing friendly about this fraud. It is fraud and theft, plain and simple. When you take advantage of the expertise and solutions available, you can fight back against chargeback fraud. What Does the Increase in Friendly Fraud Mean for You? Chargebacks were introduced as a consumer protection measure in an effort to protect consumers from fraudulent charges. But the tables have turned and consumers have learned how to use the chargeback system to their advantage. In the end, chargebacks could make the cost of doing business too high. Credit and debit card companies experience increased costs. They transfer these costs to the merchants. Merchants suffer from lost revenue due to theft and from the costs of inefficiently fighting the chargebacks. These costs are transferred to the customer through increased prices. Customers are forced to pay higher prices, resulting in decisions to forgo a purchase or in other cases, to commit fraud and theft. This cost is then transferred to the credit card and debit companies and issuers, perpetuating the cycle of chargeback fraud costs and consequences. This is why you need to overcome the inertia and stand up to chargeback fraud. The problem is that too many merchants incorrectly assume that the best solution is to ignore this fraud. These merchants are wrong The impacts affect all parties in the payment ecosystem: Credit card companies experience increased costs Merchants (who bear the brunt of this, financially) pay the price from losses associated with fraudulent chargebacks (merchant pays whether they choose to accept these chargebacks or fight) and pass that cost along to the consumer in the form of increased prices. Consumers must pay higher prices, creating a financial squeeze that may translate to additional friendly fraud to get things they cannot afford. How You Can Overcome Inertia and Stand Up to Chargeback Fraud First of all, congratulations on making this smart and savvy business decision. We are here to tell you that you can and will succeed in standing up to chargeback fraud. The Verifi team is on your side (as are many other companies, your suppliers, your creditors, and other invested third-party providers). Everyone wants to see you succeed. When your business is successful and thriving, the impact has tremendous trickle-down impacts. Before we get to the how of fighting chargeback fraud, we want to take things one step further by dispelling the myths that your colleagues might raise in objection to your decision to stand up to chargeback fraud: Myth: Winning chargeback disputes will reduce your monthly chargeback ratio with your acquiring bank. Truth: Chargebacks are not reduced if represented and won. Once they occur, they count against your chargeback ratio, even when you’re recovering the lost money. Myth: It’s impossible to win a CNP chargeback when you don’t have a signed receipt. Truth: Compelling evidence including customer authentication/authorization, emails providing evidence of a connection between the card holder and the purchase – can all be used. Myth: You can’t lower your chargeback ratio without reducing sales. Truth: There are a number of measures you can undertake to ensure your sales are not reduced. For example, ask your customers to register their cardholder information, this allows online merchants to validate return visitors quickly and quietly. Myth: You can’t fight PayPal disputes. Truth: PayPal offers Seller Protection from chargebacks to merchants who meet eligibility requirements based on Unauthorized Transactions or Item Not Received. The scope protects Sellers for the entire payment amount and waives the Chargeback Fee. Myth: The only thing I need to be concerned with is the first representment win rate. This is the best measure of success when it comes to fighting chargebacks and reclaiming revenue. Truth: The best way to judge success is by the net win rate. Only looking at the first representment win rate can paint a false picture and exaggerate success since many are ultimately reversed. The net win rate is the best gauge of benefit and results. So, now that the myths are dispelled, on to How You Can Overcome Inertia and Stand Up to Chargeback Fraud. Verifi’s Total Chargeback Management System Stands Up to Chargeback Fraud from Start to Finish Verifi’s Total Chargeback Management System provides merchants with a proven solution for stopping friendly and chargeback fraud from the beginning and offers the expertise you need to recover revenues from chargebacks that do sneak through. By combining unmatched, award-winning solutions to provide end-to-end dispute management, you can see: Significant risk reduction: stop up to 40% or more of both chargebacks and friendly fraud. Improved profitability: win rates of nearly two times the industry average. Streamlined chargeback management: merchants optimize capital with zero guesswork about refunding transactions and reduce time and operational costs on processing chargebacks that can’t be avoided. Reporting: key activity based reporting measures all critical metrics and performance. While some merchants do rely on single point or stacking point solutions, these are not the solutions we want you to be using. Single point solutions typically only focus on either prevention or recovery – neglecting half of the chargeback problem and costing more money. Stacking point solutions are expensive to integrate and require constant updates. Verifi’s solutions are customizable to your needs. Choose full coverage and support from the Verifi team or integrate our turn-key solutions to support your operation. Verifi’s Total Chargeback Management Solution produces immediate risk management and profit improvements. Our solution is the only proprietary end-to-end solution backed by over a decade of expertise of chargeback prevention, dispute management, and revenue recovery. Near real-time notifications alert merchants of chargebacks immediately, enabling quick resolution. Provides detailed reason code feedback and insight into operational issues. Verifi manages hundreds of thousands of fraud and non-fraud chargebacks monthly. Our patented, closed-loop network helps merchants avoid the false positives that tend to sneak through with point solutions. We prevent the higher costs and unnecessary refunding that comes with single point and stacking point solutions. Ultimately, What Does this Mean for You, The Merchant? You need to stand out and stand up. Don’t be like your competitors and assume that chargeback fraud is simply the cost of doing business. Do your and learn how you can and will protect your company from chargeback and friendly fraud. Remember that the costs of this fraud and theft are not decreasing, and you do need to protect your profit margin. Working with experts like Verifi can go a very long way in taking the uncertainty and unnecessary costs out of your business. Streamline your chargeback process, reap the rewards of increased profits, less stress and uncertainty, more satisfied customers, investors, suppliers, issuers and third-party vendors. Standing up to chargeback fraud is a win-win measure for the entire retails sales industry.
