Fraud Chargebacks: How to Reduce Them?

Many companies become the victims of fraud chargebacks. Nowadays, scammers find new ways to benefit from businesses. However, there are many methods to prevent and reduce chargeback fraud. You can use the instruments that analyze fraudulent transactions and stop them before you lose the cost of this dispute. The consequences of fraud chargebacks can be much bigger than you think. So, this article is intended to help you to understand their process better and discover more about the instruments available. 

What are Fraud Chargebacks? 

A chargeback happens when the customer buys the product and asks for the money return for different reasons. If the client wins the dispute, the company should make the chargeback. However, even when the seller agrees with the chargeback, it has more negative effects than the cost of the product. You can lose the sales costs, marketing costs, fees, and overhead costs. 

The reasons for fraud chargebacks differ a lot. That’s why there are two main types of them: criminal fraud and friendly or accidental fraud. The first one happens when people use stolen credit card numbers to make a purchase. Friendly fraud occurs when the customer purchases a product legally but still wants their money back. When you increase chargeback fraud protection, you reduce both accidents. 

How to Fight Them? 

Several steps you can take to fight both types of chargebacks properly. Of course, you can’t get rid of them completely, but you can avoid a huge amount of them. 

Step 1: Set two-step verification

You can’t check the customer’s credit card or get a signature to confirm their person. But you can set a two-step verification for making a transaction. In this case, it will be more difficult to use the stolen credit card number. Such a method reduces criminal fraud a lot, but it’s not enough to cope with the whole amount of chargebacks. That means you should apply it with other methods. 

Step 2: Monitor unusual activity

The best way to fight chargebacks is to prevent them. If you notice unusual activity or mismatching information, you can contact the customer for the purchase confirmation. It’s significant to do this when someone wants to buy a huge number of your products. Also, when the billing address differs from the shipping one, it’s better to check such purchases. When you monitor unusual activity for a longer time, you can see which products have a higher rating of chargeback. This data is essential for quality chargeback prevention. 

Step 3: Analyze fraud transactions

If you get a lot of fraud chargebacks, you should use them to analyze the reasons. Each chargeback has its reason code. When you analyze it and the transaction, you will see which indicators of a chargeback you have missed. Look for similar purchases, because the same scammers can use diverse accounts.

Step 4: Examine the non-fraud declines

The high amount of declines might increase the fraud risk. So, if you analyze the reasons for friendly chargebacks, you can see what works in the wrong way. For example, if many customers can’t recognize their transactions, you should solve this problem with your credit card processing company. 

Step 5: Apply high-quality protection instrument

Nowadays, you may cooperate with diverse companies that offer their tools for preventing chargebacks. One of them is the platform that has various solutions for all company types. Among them are account takeover protection, card-not-present fraud protection, and synthetic identity theft protection. They also offer products like VMPI and Ethoca chargeback prevention. Device fingerprinting, Trustchain, and KYC automation are also available.

Get Rid of Chargebacks Easily

When you face fraud chargebacks, they may seem quite challenging to fight. Of course, scammers improve their techniques, but you can prevent most of the fraud and friendly chargebacks. The protection instruments include two-step verification, monitoring, and analyzing unusual activity. VMPI and Ethoca chargeback preventions are one of the most effective products you can apply nowadays. You can read more about them on the Covery website and decide which one is more suitable for your company. It’s better to prevent chargebacks than cope with their consequences.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.