Chargeback fraud is estimated to cost sellers up to $125 billion globally in 2023. We list the top five ways to keep your business safe.
‘Chargeback fraud,’ also known as ‘friendly fraud,’ is where the buyer calls their card issuer and claims they were charged for a product or service they didn’t recognize instead of contacting the merchant.
The card issuer reverses the payment, and the buyer keeps the product and the money.
Chargeback fraud is often cited as one of the most significant expenses to merchants (they lose a legitimate payment and stock), and the costs associated are a matter of life and death to some businesses.
What’s more concerning is that as the e-commerce market grows, chargeback fraud is only expected to increase.
According to some reports, chargeback fraud is set to cost sellers up to $125 billion globally in 2023, but you can do some small things to prevent your business from being a victim.
1. Only Ever Provide a Top-Rated Customer Service
Always respond promptly to customer inquiries, address concerns, and provide exceptional customer service.
Proactively resolving any issues can prevent frustrated customers from resorting to chargebacks to resolve disputes.
Don’t let them feel that they have been wronged or that your business has personally made it difficult for them to deal with product issues.
2. Provide Detailed Product Descriptions and Images
Ensure that your product descriptions are accurate, detailed, and include high-quality images. Don’t leave out a single detail.
Detailed descriptions help set proper customer expectations and reduce the likelihood of disputes from mismatched product descriptions.
Again, if the customer feels you have wronged them, they may become spiteful and seek their money back.
3. Implement Robust Identity Verification Measures
Identity verification ensures that the customer making the purchase is a legitimate cardholder and is a top way of staving off scammers.
These measures can include using Address Verification System (AVS) to match the billing address, requiring the card’s security code (CVV), or employing more advanced methods like two-factor authentication (2FA).
4. Maintain Detailed Records of All Transactions
Transaction records can serve as evidence in case of chargeback disputes, demonstrating that the customer ordered and received their products.
Records should include order confirmations, shipment tracking information, and customer interactions.
Armed with these records, it will be hard for fraudsters to argue their case.
5. Implement Fraud Detection Tools
These tools can closely monitor transactions for any suspicious patterns or behavior. Identifying and flagging potentially fraudulent activities can help prevent chargebacks before they occur.
Multiple transactions from the same IP address, frequent purchases with different cards, or a sudden increase in transaction amounts are all potential red flags.