Chargeback Fraud
Are you a merchant faced with losing thousands of dollars annually due to chargeback fraud?
What is a chargeback? A chargeback is a dispute which results in a transaction reversal to prevent fraudulent activity committed by individuals and merchants alike. Credit card providers demand this so a retailer can make good the loss from fraudulent or disputed transactions. Confused or malicious cardholders can misuse this dispute process. Forensic accounting & advisory services are one way a business can arm themselves against financial disputes of all types.
If a cardholder files a dispute and the issuing bank finds that the dispute has value, the transaction will be deducted from the merchant’s account. The merchant will receive a dispute fee and may lose the merchandise services associated with that transaction.
The fraudster can be the cardholder in the case of friendly fraud. It could be the individual whose name is on the card or someone authorized to use the card. The transaction was approved, past fraud protection, seeming to be a legitimate purchase.
Customer disputes from “friendly fraud” are a growing and significant problem for merchants. It can be merely a case of cardholder confusion due to a charge they do not recognize, or it can be an attempt to defraud the system for personal gain. They will typically contact the card issuer first rather than contacting the merchant.
The result is unnecessary chargeback fraud costs, a poor customer experience, and, more importantly, lost revenue. Also, there are no consequences for abusive cardholder behavior, which encourages them to continue this behavior for future gain.
The customer files a chargeback to regain the transaction dollar amount while keeping the product or services provided. There are many reasons a fraudster can provide as a reason for filing a chargeback.
- The service or item was not received.
- The service or item was not as described, wrong color, poor quality, etc.
- The merchant did not cancel the customer’s recurring payment after it was required.
- The cardholder did not authorize the original transaction.
Whether innocent or intentional, the outcome of friendly fraud is costly for the merchant.
The only way a merchant can fight a dispute and get their revenue returned is to create a dispute response document. The goal of that document is to refute the claim of the cardholder. Merchants need to find out what the claim behind the dispute is. By the dispute reason code, they can determine what evidence is required to explain the dispute’s cause.
Merchants should research the reason code to ensure they have provided all the necessary information required to create a winning response document.
The most potent responses are when the card network rules and regulations direct the compelling evidence. Merchants should make sure they respond to the dispute within the required time frame or will no longer have the opportunity to get their revenue back.
But what if there was chargeback fraud protection for merchants that would not only eradicate chargeback costs and transform the costly process but recover the lost revenue as well?
To protect your business and your bottom line, consider a chargeback fraud eliminator. You will be glad you did.