© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - Chargeback Fraud Detection: 3 Methods To Reduce Disputes and Chargeback Costs
Posted 24th February 2023

Chargeback Fraud Detection: 3 Methods To Reduce Disputes and Chargeback Costs

Do you know that for every $1 lost to chargebacks, stakeholders lose $4.23 on average? Little wonder eCommerce businesses dread chargebacks; it is not only costly, it is time-consuming.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

Chargeback Fraud Detection: 3 Methods To Reduce Disputes and Chargeback Costs

Do you know that for every $1 lost to chargebacks, stakeholders lose $4.23 on average? Little wonder eCommerce businesses dread chargebacks; it is not only costly, it is time-consuming. To make matters worse, chargeback frauds are on the rise and are the number one fraud attack for merchants. Merchants are, therefore, justified to want to fight chargeback fraud with all they have.

To save the time, money, and energy required to resolve a chargeback issue, it is best to seek ways to prevent it from happening. How do you achieve that? Read on to learn ways to detect and avoid chargeback fraud as well as how to reduce disputes and chargeback costs.

What is a chargeback

A chargeback is a reversal of funds from a credit or debit card provider to a cardholder following a reported disputed transaction or fraud. Chargebacks are different from refunds because refunds are initiated by the merchant while chargebacks are initiated by the buyer. Also, in chargebacks, the buyer keeps the items purchased.

How do chargebacks occur

A chargeback happens when a customer is dissatisfied with a transaction and feels they deserve to get their money back. It could be that the buyer didn’t get what they expected or their card was used without their permission. When the customer’s claim is verified, funds are removed from the merchant’s account and sent to the customer’s account. This process can last weeks or months.

What is chargeback recovery

A chargeback recovery is when a seller requests a chargeback made to their account be reversed. This happens when the merchant, upon further investigations, discovers the buyer’s claim to be incorrect or fraudulent.

Reasons buyers request chargebacks

There are a couple of reasons why chargebacks occur. Find them below.

When the merchant makes a mistake

A seller might mistakenly ship the wrong product or there might be a technical error from the merchant’s end. In addition, a discount might be missed. The buyer can request a chargeback.

When the payment is unauthorized

Sometimes, unauthorized users like children or relatives can make payments for a product knowingly or unknowingly. The customer can ask for a chargeback in this situation.

When there’s a card fraud

When a card is stolen and used by fraudsters to purchase an item online, the owner of the card can ask for a chargeback.

When there’s a first-party fraud

First-party fraud occurs when the owner of the card decides to defraud the merchant by making false claims.

Stakeholders in the chargeback process

To detect and prevent chargeback swindling, you must be aware of the parties involved in the process.

  • The customer or buyer
  • The seller or merchant
  • The issuing bank: the buyer’s card provider
  • The acquiring bank: the bank that processes the seller’s card payments
  • The payment gateway provider: the owners of the software used for the transaction from the seller to the acquiring bank
  • The credit card company: the company that supervises the chargeback process

What is chargeback fraud

A chargeback fraud is any fraudulent act connected to a chargeback request or process, whether false requests/claims, card fraud, or dishonest interference.

Two types of chargeback fraud

The two main types of chargeback double-dealing are the following:

Friendly fraud: this occurs when the card owner commits the fraud Criminal fraud: this happens when a third party commits the fraud

How to detect chargeback fraud

To detect chargeback double-dealing, here are steps you can take.

Understand anti-money laundry (AML) guidelines

Anti-money laundry (AML) guidelines are regulations laid down to reduce the flow of dirty money in the banking system. SEON offers a detailed breakdown of these guidelines as well as how they affect your business. To detect and fight online fraud in your business, you must be familiar with regulations like this that tackle sharp money practices.

Flag the use of VPNs or other proxy connections

The use of VPNs to purchase an item online is a red flag and should be considered suspicious. Fraudsters often hide their locations with a VPN when they want to commit fraud.

Be cautious about purchases from high-risk countries

Some countries are known for fraudulent activities, especially online fraud. When users from such countries attempt to buy from you, be alert and take preventive measures.

3 methods to reduce disputes and chargeback costs

Whether through fraud or not, chargebacks are inevitable if you’re a merchant. Here are ways you can reduce disputes and chargeback costs.

Tighten your security Make sure you choose payment providers who take security very seriously and work to help their customers maintain low chargebacks. Ensure you update your POS software regularly. Use payment gateways that offer extra-secure technologies.

Take extra care with shipping To reduce disputes and chargeback costs, ensure you put in place best shipping practices like using a reliable shipping company, providing tracking features, and setting realistic delivery times, among others. Having a backup internet to ensure there are no hitches in accessing the information on your site is also essential.

Establish a clear return and refund policy

When you make your return and refund policy clear to your customers, many will follow these routes instead of requesting chargebacks. Friendly fraud will be quite difficult if there are clear terms on refunds. Let your customers know the options they have if they’re satisfied with a purchase.

Take the right steps and reduce chargeback frauds in your business

Chargeback costs can weigh any business down if not well-managed. Thankfully, these costs can be reduced if the right decisions and steps are taken to detect and prevent chargeback swindling. The information given above lets you know what chargebacks are all about, how fraud comes in, how you can detect and prevent chargeback double-dealing, and how to reduce disputes and chargeback costs.

Categories: News, Strategy


You Might Also Like
Read Full PostRead - Eye Icon
Clearwater International Advises Staffgroup during Cordant Group’s Acquisition
Finance
09/06/2015Clearwater International Advises Staffgroup during Cordant Group’s Acquisition

Clearwater International Advises Staffgroup during Cordant Group's Acquisition

Read Full PostRead - Eye Icon
Brexit – The Tax Aspects
Finance
03/06/2016Brexit – The Tax Aspects

Britain leaving the European Union (commonly coined “The Brexit”) has sparked a lively nationwide debate. Opinion polls are split, and even the President of the USA has waded into the muddied waters to give the ‘stay’ campaign some more weight.

Read Full PostRead - Eye Icon
The Impacts of Corporate Tax Reform III
Legal
04/01/2017The Impacts of Corporate Tax Reform III

We are a full-service business law firm. This enables us to render all our services as integrated services across legal areas. Most of our clients are multinational businesses. The firm was established 1911, so we have a history of 105 years now. This makes us

Read Full PostRead - Eye Icon
Challenging Blood Test Evidence in OWI/DUI Cases: Legal Strategies and Implications
News
29/08/2023Challenging Blood Test Evidence in OWI/DUI Cases: Legal Strategies and Implications

OWI or DUI blood tests are almost entirely based on a blood test as evidence. Such a test determines the presence of alcohol or drugs in the driver’s system. A blood test is one of the most accurate methods of measuring a person’s blood alcohol level (BAC)

Read Full PostRead - Eye Icon
How to Write a Grant Proposal For Non-Profit Projects
Legal
10/11/2022How to Write a Grant Proposal For Non-Profit Projects

Grant writing can be a daunting task. If you’ve never written a grant proposal before the idea of putting one together can be overwhelming. This article will cover the proposal writing process from start to finish, with tips and best practices along the way.

Read Full PostRead - Eye Icon
Tips for Students: Leadership Qualities That Are Important to Business
Leadership
04/09/2020Tips for Students: Leadership Qualities That Are Important to Business

You might have heard the saying that a leader can’t be created, they are only born that way. This can’t be further from the truth as almost everyone can become a leader.

Read Full PostRead - Eye Icon
Casting a Light on Successful Streaming
Innovation
07/11/2024Casting a Light on Successful Streaming

Founded in 2010, Lightcast.com is a multi-platform Over-The-Top and Online Video Platform provider.

Read Full PostRead - Eye Icon
Leveraging VR for Immersive Learning Experiences in Professional Settings
Leadership
25/02/2025Leveraging VR for Immersive Learning Experiences in Professional Settings

Virtual reality (VR) could revolutionize learning in professional settings by turning tedious, unengaging training sessions into immersive, motivational experiences. What should business leaders know before they consider investing?

Read Full PostRead - Eye Icon
Things to Consider While Choosing a Business Broker
News
15/03/2022Things to Consider While Choosing a Business Broker

Selling your business is a once in a blue moon opportunity you cannot miss, and finding the appropriate business broker is critical to a smooth transaction. In most cases, a high-priced sale of one’s small business is a long-time goal for many business owner



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have a number of unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow