As we all know, a chargeback is a bank-initiated refund for a credit card purchase. Rather than request a refund from the merchant who facilitated the purchase, cardholders can contact their bank and request a chargeback by disputing a particular transaction. While chargebacks empower consumers, chargeback fraud is an enormous problem for merchants.
To go in depth about the problem, Nate Foss, VP of Partner Relations for Chargebacks911®, and Jay Johns, Global Partner Manager at iovation, recently hosted a webinar. They discussed how chargeback fraud is severely impacting merchants and what options they have to combat it while continuing to provide a friction-less experience for their customers.
So what is chargeback fraud exactly? It is any scenario where the consumer abuses the chargeback process to steal from a merchant. This can be a deliberate claim, (a practice called “cyber shoplifting”), but more often, it’s unintentional. This is what we refer to as “friendly fraud.”
Friendly fraud is sometimes triggered by buyer’s remorse, expired refunds, or even a misidentified transaction on a customer’s billing statement. The buyer asks the merchant or bank to request a chargeback to return the funds back to them. In turn, the merchant has now had to refund the customer resulting in a loss of revenue and merchandise.
With the increased use of online merchants over brick and mortar businesses, friendly fraud is accounting for a large portion of chargebacks. In fact, a study conducted by Chargebacks911 suggests that between 60-80% of all disputes are probable cases of friendly fraud. The issues lie in the fact that friendly fraud is a post-transactional fraud threat, meaning the merchants’ options for fraud prevention are limited. The best option is to dispute friendly fraud through the chargeback representment process. This involves gathering evidence and other information to demonstrate that a transaction was completed properly
Chargebacks911 and iovation have partnered to combat 1st and 3rd party fraud like chargeback fraud. Chargebacks911’s customizable management merchant solution and iovation’s FraudForce device reputation intelligence create a multilayer approach to increase merchants’ revenue, reduce fraud, all while decreasing the overall total number of chargebacks to a merchant. These solutions address every stage of the buyer’s journey, from customer service before the sale, to creating login account credentials, all the way to revenue recovery. When Chargebacks911 is integrated, merchants have seen an 85% win rate when it comes to reducing the effect of friendly fraud.
To learn more about combating chargeback fraud click here to listen to the full webinar.