© Copyright Acquisition International 2024 - 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
2016’s Ones to Watch in Anti-Corruption Due Diligence
Legal
06/06/20162016’s Ones to Watch in Anti-Corruption Due Diligence

Anti-corruption due diligence has become a mainstay in global M&A. Increased awareness of bribery and corruption issues and the rapid growth of international enforcement.

Read Full PostRead - Eye Icon
Alcumus Acquisition  of Safety Management  & Monitoring Services
Innovation
02/04/2015Alcumus Acquisition of Safety Management & Monitoring Services

Martin Smith, Chief Executive Officer at Alcumus, shares his vision for growth within the TIC and GRC markets.

Read Full PostRead - Eye Icon
Revolutionize Your B2B Business: Unveiling the Top eCommerce Platforms of 2023
News
02/10/2023Revolutionize Your B2B Business: Unveiling the Top eCommerce Platforms of 2023

Explore the future of B2B commerce with our comprehensive guide to the top eCommerce platforms in 2023. Streamline your business, increase efficiency, and stay ahead of the competition.

Read Full PostRead - Eye Icon
IP Awards FAQs
Strategy
26/02/2015IP Awards FAQs

IP Awards 2015 FAQs

Read Full PostRead - Eye Icon
Pulling the Strings: Gibson Guitar Corp
Strategy
18/03/2015Pulling the Strings: Gibson Guitar Corp

We spoke to Henry Juszkiewicz, who is Chairman and CEO of the famous Gibson Guitar Corp.

Read Full PostRead - Eye Icon
Keep Your Business Agile with Secure Data Protection
Legal
06/11/2023Keep Your Business Agile with Secure Data Protection

The modern business model is one of agility. In the past few years, we have seen a growing number of small and medium-sized enterprises (SMEs) discarding traditional, hierarchical ‘top down’ infrastructures and creating flatter and more flexible structures

Read Full PostRead - Eye Icon
Cargill Beefs up Capabilities, Commitment to Protein, with South Carolina Plant Purchase
M&A
04/03/2016Cargill Beefs up Capabilities, Commitment to Protein, with South Carolina Plant Purchase

People in the eastern United States enjoy good beef burgers and beginning this spring Cargill will be able to better meet those needs through the acquisition of the FPL Food, LLC ground beef processing plant in Columbia, S.C. Purchase of the 100,000-square-foo

Read Full PostRead - Eye Icon
As the Auto Industry Goes High Tech,  M&A Volume has Risen by 40%
Strategy
30/04/2015As the Auto Industry Goes High Tech, M&A Volume has Risen by 40%

Hampleton Partners’ three year analysis shows rapid growth of acquisitions and UK leading European activity with 30 acquired targets.

Read Full PostRead - Eye Icon
Training Video Production: What You Need to Know
News
17/05/2023Training Video Production: What You Need to Know

From brands migrating online and working teams switching to a remote-first approach—to the world’s top-rated universities launching online courses for international students, the value of e-learning tools becomes more evident from day to day. And even



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 14 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