Payment Chargeback Fraud: How to Spot and Avoid Scams?

Payment Fraud

Read on to learn in detail about payment chargeback frauds and tips to prevent the same. The past few years have witnessed a surge in online frauds pertaining to e-commerce activities, with payment chargeback frauds topping the list. These chargeback frauds hurt anyone, whether a consumer, merchant, or bank.

A chargeback refers to the process of a consumer requesting to reverse a transaction due to fraudulent transactions. These chargebacks can also take place when a business permits fraudulent payments to get through.

Now, at this very point, the issuing bank requests the merchant to pay back the transaction through the same channel as a debit or credit card transaction. However, many people confuse chargeback with refunds which is not so.

Whereas refunds are simply the process of a merchant returning the money to the consumer, in case of a chargeback, the merchant has to pay back the money through two governing bodies.

In the process, the merchant also gets penalized by these bodies, which can be hazardous for their business.

However, when a consumer makes false chargeback claims, it comes under the category of chargeback scams. To get detailed information, check out the videos on Chargebacks911

Tips To Spot and Avoid Payment Chargeback Frauds

Here are some practical tips and tricks to spot payment chargeback frauds and take action against them. 

Be Cautious About Unusual Bulk Orders

As per experts, if a particular customer has been making many different purchases in succession or has been giving separate billing addresses, it is advisable to be quite cautious.

For example, some organized crime bodies often order bulk quantities for reselling, request chargeback, and resell at 100 percent profit.

Thus, if, as a merchant, you witness any kind of unusual bulk order activity from a specific client, it is always better to back out from the order or make necessary checks before delivering.

You can even contact the credit card holder to ask about the transaction and maintain an accurate record of your conversation, for example, a mail. 

Make Use of a Strong Authentication Method

With phishing scams doing the rounds for gathering credit card information, indicating a two-factor authentication method on your websites is always advisable. This would prevent fraudsters from hacking into your client’s accounts and using their data.

Fraudsters often gather credit card information and then commit chargeback frauds in the cardholder’s name.

One advisable method to prevent such fraud is to implement a rule for the customers to submit the CVV mentioned on the back of their credit cards for making a purchase.

It is difficult for scamsters to know about the CVV, as mentioned behind a credit card, which strengthens your authentication method.

Security systems, such as MasterCard SecureCode or American Express SafeKey, are also relevant measures to protect clients’ data during transactions. 

Confirming the Orders is Advisable

Another tip to prevent chargeback fraud is to confirm the order as soon as it has been placed. One way of doing so is to send an automatic mail confirming the order to the customer immediately after he has put it.

This would work as a legal reminder to the customers about their purchases being made and an effective means of preventing friendly fraud.

As per experts, this step comes in handy in discouraging would-be chargeback fraudsters, as an email would confirm that they have made the purchase. 

Make Refund, Return, and Cancellation Policies Quite Clear

Most of the payment chargeback scams are successful due to the lack of clarity in the refund, return, and cancellation policies laid down by the merchants.

Many chargeback return requests could also be reduced if your return policies are clear enough for your customers.

Also, it becomes easy to counter a client’s claim for a chargeback if it has been mentioned clearly in the refund or return policy that their purchase is not under any warranty scheme.

In addition, complex return rules sometimes make it difficult for consumers to understand the policies and make mistakes.

You can even put a check sign to ensure that the clients have read about the guidelines before making a purchase. 

Maintain Documentation Regarding Transactions

Documentation goes a long way in disputing chargeback frauds. Thus, again, it is advisable to maintain proper physical records of the purchases and transactions being made.

However, with the e-commerce scenario going online, it may be difficult to maintain physical records easily.

In such a case, use a technology solution to keep such records and even include the exact date and time of the transaction. 

Work on Your Customer Service

Ensure that your customer service’s contact number is mentioned clearly on your website, your delivery package, and printed receipts.

Also, ensure that your customer representatives are informed enough to answer all kinds of queries regarding your products.

This would reduce the percentage of routine enquiries escalating into chargebacks and save any chargeback frauds in the future. 

Final Words

Payment chargeback fraud can be hazardous to a business’s reputation and reflect poorly on a client’s records.

Thus, taking adequate steps to reduce them at any cost is advisable. However, with scams getting smarter day by day, simple steps can be insufficient in doing so.

This is where the technology comes into the picture, and the steps mentioned above can help you in making the most of it.

Unfortunately, these modern-day simple yet effective steps can indeed work positively in reducing payment chargeback frauds to a great extent.

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