X
X
Back to the top

Blog

Blog

Blog

6 Tips for Fighting Credit Card Chargebacks

6 Tips for Fighting Credit Card Chargebacks

 

A credit card chargeback is a refund issued when a cardholder contacts their card issuer to request a reversal of charges that they feel are made in bad faith. The issuer investigates the request and, if it determines that the charge was not authorized, fraudulent, or the merchant didn’t deliver a quality product or service, it reverses the charge and refunds the amount to the cardholder.

This is a common practice that—for legitimate or illegitimate reasons—can have a significant effect on your online store’s bottom line.

To help you mitigate and manage these impacts, here we discuss strategies on how to deal with chargebacks and how to fight a credit card dispute.

How Do You Fight a Credit Card Chargeback?

One of the biggest disagreements many online merchants have with return item chargebacks is that they are often authorized far too liberally. Many merchants would argue that they weren’t given any warning of a customer complaint or granted an appropriate amount of time to solve the customer’s issue with a product or service.

Thankfully, there are steps you can take to fight credit card chargebacks:

1. Be Aware That Chargebacks Are Often Issued Without Warning

Usually, you will receive no notification of a chargeback. Most times, the only way you’ll know of a chargeback is because funds will be withdrawn from your business’ bank account by a customer’s card issuer.

2. Keep a Vigilant Watch on Your Business’s Bank Account

Once you become aware of a chargeback, understand that there is a response deadline that you must meet in order to dispute the removal of funds. As such, it’s a good idea to monitor your business’ bank account; otherwise, you’ll likely miss the window of time you have to contest a chargeback.

3. Do Your Research on Why a Chargeback Was Issued

In order to lodge a dispute, understand there is a “reason code” issued with each chargeback that explains the reason the chargeback was issued. To help you fight a chargeback, be sure to do your research on the reason code, as it will go a long way in helping you win a chargeback dispute.

4. Gather Compelling Evidence to Fight the Chargeback

In order to successfully dispute a chargeback, you must gather enough compelling evidence for a card issuer to reverse their decision. Evidence like sales receipts, a copy of your returns policy, and any direct communication with the customer will all help to overturn an illegitimately issued chargeback.

5. Write a Rebuttal

A well-written rebuttal letter will go a long way to successfully disputing a chargeback. Include the evidence you have gathered and describe why you believe the chargeback has been granted unjustifiably or in bad faith.

6. If You Need It, Reach Out for Help

Successfully handling chargebacks can be both a confusing process and a lot of hard work. To soften the blow, why not reach out to an institute that fights chargebacks regularly, like FUGU?

Should You Fight Chargebacks?

Chargebacks are expensive, and the cost isn’t just in the fees. You also lose the revenue generated from a sale, which can take a considerable chunk out of your profits. To avoid this, chargeback management measures can be taken, although even the best preparation won’t keep your business completely safe from chargebacks.

To help you out, contact our team of experts here at FUGU, as we are more than happy to help you prevent as many chargebacks as you can so that you can get back to driving your business toward success.

What an AVS Mismatch Is and How to Fix It

What an AVS Mismatch Is and How to Fix It

Address verification service (AVS) is a fraud prevention measure used by merchants that accept credit or debit cards. AVS compares the billing address provided by the customer with the address on file at the card-issuing bank. If the addresses do not match, the transaction may be declined to help prevent fraudulent activity.

This helps to ensure that the person making the purchase is actually the cardholder and not someone attempting to use the card illegally. Read on to learn more about AVS mismatches, how to tell if they indicate fraud, and how to fix them.

 

What Is the Purpose of an AVS?

An AVS mismatch arises when a billing address is entered into a payment processing system but does not match the address on file with the card-issuing bank. This mismatch can cause a transaction to be declined as the bank will presume that the purchase is being attempted with a stolen or counterfeit debit or credit card. In most cases, AVS mismatches can be resolved by contacting the card issuer and updating the billing address on file.

Are AVS Mismatches Indicative of Fraud?

AVS mismatches can indicate fraudulent activity if the discrepancies are significant and not attributable to innocent causes.

Although, merchants should understand that not all AVS mismatches indicate fraudulent activity. There are also many innocent explanations for AVS mismatches, such as:

Out of date billing addresses

Cardholders that have recently moved from one residence to another often forget to update their details with their financial institute. This results in a discrepancy between billing addresses, leading to an AVS flagging a legitimate transaction.

Supported countries

AVS is not supported by countries outside of the US, UK, and Canada. This can lead to cards that have been issued outside of these three countries being flagged by AVS.

Multiple cards or addresses

A cardholder with multiple credit or debit cards and/or residing in multiple residential locations can also lead to an AVS flagging a non-fraudulent transaction.

Fixing an AVS Mismatch

When a transaction is flagged by AVS, there are four courses of action they can take, which are:

  1. Retry the transaction.
  2. If the customer is somebody you know and trust, merchants can override the AVS mismatch and payment system.
  3. Reach out to the customer’s financial institution to verify their identity.
  4. If many legitimate transactions are being flagged, merchants can contact their payment processor and rework their AVS thresholds.

AVS Filters Assisting in Fraud Protection

AVS filters are one avenue of fraud protection that businesses can use to help combat nefarious activities. While they are not a cure-all, they can be a valuable asset in a business’ anti-fraud arsenal. Some of your customers may be flagged as fraudulent by AVS filters, but this does not mean that they are not legitimate customers.

For more than understandable reasons, some customers may have their cards flagged. So instead of turning well-meaning cardholders away, why not use the strategies detailed here to turn an AVS mismatch into a legitimate purchase? Both your customers and your bottom line will thank you for it.

Cutting Costs – Automating Manual Reviews

Cutting Costs – Automating Manual Reviews

If you’re selling online, chances are that 10% of your transactions are routed to manual reviews.

This is a costly and inefficient process, hurting results in more than one way. The question is can we automate these tasks safely, without increasing exposure to fraud.

FUGU has an innovative approach, automating manual tasks working on them after the payment but before the actual risk is assumed, increasing conversion, reducing churn, and preventing fraud.

How do we do it?

FUGU continues to track transactions after the payment, engaging flagged ones according to the relevant payment scenario, i.e. our system “understands” the transaction, its incongruent elements included, initiating actions required to complete the transaction safely.

Instead of rejecting transactions, we collect, evaluate, and store the evidence required, attempting to complete the transaction within the sphere of customer care. As we get to know the customer and the transaction better, true fraud distinguishes itself from valid complexities as indicated in a variety of signals we collect and process.

Most recently, we have been chosen by a fast-growing merchant on top of Shopify to do exactly this, reduce their post-payment manual labor costs without compromising revenue. Because of the nature of the business, they had to route an inordinate amount of transactions to manual reviews, for evidence and identity assurance. We implemented our solution, automating card scans, and selfie id’s with ML.

These tasks are completed after the payment, saving up to 40 man-hours a month but also applying reviews to more transactions, reducing the merchant’s overall exposure to chargebacks and disputes.

There is time and money on the table

E-commerce uncertainty leads to loss of valid business

The fundamental problem of e-commerce risk is uncertainty. There is only so much you can get to know about your customer, without severely damaging the funnel and conversion rates. As anyone who has a sales funnel knows, each added step between product and customer has a cost in conversion. At this very moment, many designers and engineers all over the world are struggling to minimize friction, to perfect their customer journey. All of these efforts come to a halt as the funnel reaches what used to be called the final destination, checkout and payment. At this point, the customer is handed over to a third party, the payment processor. These suppliers are providing a valuable service, but they are also shaping it to protect themselves by blocking or challenging the customer before payment is concluded. In most cases these practices cause a significant loss of valid business to the merchant.

Old trick: Buy time and gather more information before you decide

There are several ways of dealing with this uncertainty, some are happy enough with overprotection, the cost is usually hidden from them and when asked they will say they have no problem with chargebacks or fraud. Others aware of the loss will try to get to know the customer pre-payment, asking many questions and significantly raising churn rates since fraud absolutely does not account for all the churn. A third option is to delay the decision using all available time to reveal more information. This is what FUGU does, we use the time after the payment to gather more information. Our data from live customers is now robust enough to show that the time after the payment can be extremely valuable if used correctly. Monitoring post payment behavior against a variety of signals recorded by our sensors shows that fraud clearly separates itself from genuine payment complexities, a process rapidly accelerated by the proactive measures taken.

FUGU’s post-payment risk prediction safely validates more transactions

The data proves the validity of bringing back old tricks to a new data set. The bottom line is:

FUGU approves 40% of the transactions previously blocked by mistake.

Just that translates into a 1% increase in topline.

But there is more,

FUGU successfully identified 100%  of Friendly Fraud for that specific time period.

Simply put, it is money on the table!

The future of payments is far beyond a handshake at POS

The future of payments is far beyond a handshake at POS

 

The beginning of a beautiful friendship

In the old world the payment part of a transaction was a straightforward matter, a payment made in exchange for goods in a distinct moment in time – imagine two people shaking hands in the market. This seemed to be the case in ecommerce as well, with credit card transactions in place of cash. The evolution of payments and the rise of new forms of fraud such as Chargeback Fraud determine that it is no longer so. These days a payment indeed starts at the point of sale but will be final and secured only at a much later phase where last installment was made or the chargeback or return option expires. Online merchants should understand the opportunities of monitoring the relationship with their customers during that time frame and leverage it to make better business decisions.

New “Starched” payment models are on the rise

Globalization has quickly exposed merchants to higher competition where product differentiation is no longer enough. One of the ways to stand out had been by business model differentiation leading to a constant evolution of payments. No longer a handshake at a deterministic moment in time, we now need to consider payment a continuous relationship only starting at POS. New payment models now offering longer relationships where payment is either differed or split are on the rise. Solutions like split it or Buy Now Pay Later are offered by merchants to their customers as means of differentiation and in many other cases simply because it is the new standard.

Merchants should monitor, Post-Payment relationship with their customers

Merchants shouldering most of the fraud liability along these longer timelines, use risk analysis tools that limit themselves to a snapshot analysis of information available at POS the site of the Handshake. It means they completely ignore all information revealed during the payment relationship far after POS. Instead of a snapshot, online sellers need a “video” capturing and analyzing the evolution of risk long after the initial risk assessment has been made.

For example:

  1. Something is purchased and paid for later; what happens when customer care receives a request for a change of delivery address, does this change the risk evaluation? It seems obvious that such information is relevant to risk after the payment and should be collected and factored.
  2. A payment was split into installments and customers’ satisfaction drops; they might turn into friendly fraudsters.
  3. Or simply the customer tried to cancel an order with no success and is pushed towards falsely denying the transaction.
  4. A recurring payment subscriber is unhappy with a deal and turns to disputing the charge.

Payment risk tools evolve beyond a “snapshot” at POS

Many merchants shore the dynamic aspect of risk by shifting liability through 3D Secure or other forms of insurance, but these are costly measures with negative effects on the topline. FUGU with its innovative post – payment risk monitoring solution offers a way to gain visibility on payment relationship, spreading sensors along the delivery and payment timeline, continuously analyzing signals captured and anticipating fraud on a sequential time award basis. FUGU with post-payment monitoring capabilities is the only solution in the market who can alert merchants when:

  1. Customers update delivery address after the payment, this could have a direct impact on the risk analysis and it is logged and factored.
  2. Customer with a split payment contacts customer care with a complaint, this could lead to a dispute. Fugu logs and factors the action as well as its embedded data, alerting to risk while shoring it with further documentation.
  3. Customer consulting the return policy after delivery, could be a sign of customer considering turning to friendly fraud, logging and factoring the visit can also trigger proactive measures that mitigate and deter fraud.
  4. A recurring charge generates recurring touch points with the customer; these are analyzed and factored to provide a dynamic view of long-term risk.

All these offer merchants ways to mitigate that risk without negatively affecting conversion rates. (checkout our blog post)

The post-payment psychological affect

Turning our focus to the Post Payment is already in itself a shift in the way we perceive the business process, that is a mental operation. By looking at the transaction from the point that until now was considered an end point, allows both the merchant and the customer to see things in a new way that leads to more transactions being completed. Generally speaking, we can consider these changes as psychological and they apply to both sides of the transaction:

The main thing we need to consider here are the psychological effects of rejection. If you have ever been in a situation where your card was declined for no good reason, you are well aware of the odd mix of humiliation and indignation that one feels. This is to say that any decline should be well considered as false positives cause serious disaffection and most likely will lead to life time loss of customer value.

FUGU is highly valuable in this area as the tools it offers make it safe to continue working on the transaction while constantly reducing the probability of chargeback and virtually diminishing the possibility of losing a fraudulent dispute as all communications are analyzed and collected and can eventually be turned over as evidence.

Customer Perspective:

From the customer perspective a distinct shift takes place after the payment, when all the steps taken to make the transaction happen are framed as customer care. This is diametrically opposed to the situation before the payment where all these inquiries and challenges are endured as challenges. After the payment the process is at its most collaborative and offering such customer care can go a long way from driving the customer towards the eCommerce giants, who can afford to be less suspicious for a variety of reasons.

Merchant Perspective:

The most notable shift that FUGU allows from the merchant perspective has to do with fear of fraud. Fear of loss is well founded, even a small amount of disputes can cause major headaches, beyond the material loss the Credit Card industry can be very punishing towards small and medium operations. This leads to a quite justified fear of chargeback that in turn causes merchants (or gateways) to impose strict rules combatting fraud. These rules more often than not, turn out to be “too” effective causing fraud rates to come down while generating an unmeasured number of “false positives”. These denial are perhaps justified without the right tools like the one we offer, that gives you peace of mind, reducing fraud, while enabling more transactions.

How Banks Investigate Unauthorized Transactions and Fraud

Banking institutes work overtime to investigate unauthorized transactions and prevent fraud, and they’ve certainly got their work cut out for them. Particularly now, in the age of digital banking, fraud comes in many shapes and sizes.

To help you better understand unauthorized charges and fraudulent transactions, this post will explore how banks go about investigating these types of nefarious activities.

The Fraud Investigation Process

Do banks really investigate disputes?

Yes, they do. Here are the typical steps banks follow during a fraud investigation:

Investigation request

Some fraud investigations are triggered by a bank’s automated systems, while others are instigated by a customer inquiry. Whichever the case, the commencement of an investigatory process begins with the lodgment of an investigation request.

Evaluation process

The nuts and bolts of bank fraud investigations involve the bank evaluating the evidence and transactional history recorded on their systems. Banks will scour through transactional factors like geolocation, timestamps, device IP addresses, and credit card or account history.

 Verdict

Once an investigation has concluded, the customer will be contacted by the bank and provided with a summary of the investigation. If nefarious activity was detected and unauthorized transactions were carried out, the customer will be refunded the amount missing from their account in full.

In the event that something more sinister has been carried out, such as identity theft, banks will hand over the information to the authorities, and the police will carry out their own investigation.

How Long Do Bank Fraud Investigations Take?

By law, most banking institutes are held to a 10 business day deadline. Within this period, a formal investigation must be conducted to determine whether or not fraudulent activity has been carried out.

Usually, investigations are concluded within this time frame.

If, for whatever reason, an institute needs longer than 10 days to carry out a bank fraud investigation, the bank will temporarily refund the customer’s account with provisional credit.

Refunding Credit Card Fraud vs. Debit Card Fraud

As most credit card issuers offer a zero-fraud liability, the refund process for credit card fraud is fairly simple. If someone gets hold of a credit card number and makes an unauthorized transaction, your chances of getting a refund are very high.

On the other hand, debit card theft investigations are a little different. Sometimes, a debit card or atm fraud investigation process won’t result in a customer receiving a refund, as many banking institutes don’t offer the same level of protection that they offer credit card holders.

Can Fraud Be Prevented?

With many transactions being processed through a business account, fraud isn’t always the easiest thing to keep on top of. Thankfully, with the help of a fraud prevention tool like FUGU, avoiding fraud has never been easier.

FUGU prevents fraudulent transactions by detecting inconsistencies in your online banking and also employs various safeguard strategies that both protect your business accounts and its bottom line.

With FUGU, the threat of unauthorized transactions or fraudulent activities is drastically reduced.

Return Item Chargebacks: What Merchants Need to Know

In most cases, a chargeback is when a financial institution reverses a fraudulent debit card transaction. So are return item chargebacks the same as regular chargebacks?

Misleadingly, return item chargebacks aren’t what you might think they are.

Allow us to explain.

What Is and Is Not a Return Item Chargeback

Unlike a chargeback that an account holder lodges to dispute an illegitimate or fraudulent credit card charge, a return item chargeback is a fee charged to a banking customer once they deposit a check that bounces.

To make things even more confusing, there isn’t even a universally accepted term for this occurrence.

How Banks Define “Return Item Chargeback”

To hear it straight from the horse’s mouth, let’s look at how one of the biggest bank in the US, the Bank of America, defines a return item chargeback on a check. Their returned payment definition is:

We charge this fee each time a check or other item that we either cashed for you or accepted for deposit to your account is returned to us unpaid.

Here are a few more names that you’ll often see banks use to categorize this type of fee:

  • Deposited item returned fee
  • Cashed item returned fee
  • Rejected check fee
  • Rejected item chargeback
  • Bounced check fee
  • Return of deposited or cashed item fee

How Return Item Chargebacks Affect Merchants

Although becoming less and less commonplace, customers will sometimes prefer to pay for your products or services with a check. While depositing a customer’s check, there may come a time when that customer doesn’t have sufficient funds in their account and the check bounces. If this happens, not only will the person who issued the check be charged a fee by their bank, but your business account is also likely to be charged as well.

Fraudulent vs. Legitimate Return Item Chargebacks

Thankfully, return item chargeback fees are fairly easy to spot. Once you’ve deposited a check, the amount designated will appear in your bank account. If the deposited check is returned unpaid, this amount will be withdrawn from your account with the addition of a fee – usually $10-15. For example, if a check worth $189.50 bounces, the bank will withdraw the money plus the fee. So, in this case, a fee of $10 would make the withdrawn amount $199.50.

Unfortunately, though, return item chargebacks are an area of the banking system that nefarious individuals often take advantage of. Therefore, it’s important to keep a keen eye on your business account for any fraudulent activity. If you suspect fraudulent activity happening to your account, contact your bank with the relevant information as soon as possible.

Can Fraudulent Chargebacks Be Disputed and Prevented?

Return item chargeback fraud is not a new practice, but it is a growing threat to businesses. The good news is that there are steps that companies can take to prevent and dispute return fraud.

To read more about how fraudulent chargebacks can be disputed, and ultimately prevented, see our Tips to Prevent E-Commerce Chargebacks.

E-Commerce Chargebacks: How to Dispute Them and 5 Tips for Prevention

A chargeback is a process where a customer can dispute any charge with their credit card issuer, cases are judged by credit card companies, often costing online sellers the goods, the payment, and substantial chargeback fees

Unfortunately, chargebacks have become common in the e-commerce sector. To help you avoid the potential damage posed by chargeback, we’ll break down for you what happens when a customer disputes a charge, and how to prevent chargeback fraud.

Why Could E-Commerce Chargebacks Occur?

E-commerce chargebacks can be caused by several legitimate reasons and for many illegitimate ones, merchants receive the dispute and are required to respond in order not to lose by default.

  • An unauthorized transaction was charged to a cardholder’s account.
  • The goods or services were not as described.
  • The goods or services were not received.
  • The transaction was processed multiple times.

Are All E-Commerce Chargebacks Worth Disputing?

Not all, but certainly some e-commerce charges are worth disputing – particularly if they appear to be lodged in bad faith.

If you deem a chargeback to be illegitimate, as an online business owner, you’re well within your right to dispute them. Legitimate chargeback requests can be handled easily, but illegitimate ones can be troublesome and should not be neglected. In order to prevent fraudulent or unauthorized chargebacks, follow the steps below:

  1. Work within the deadline for filing your chargeback dispute.
  2. Make a record of all your customer transaction details.
  3. Gather evidence related to the dispute.
  4. Submit the evidence to the acquirer.
  5. Use a chargeback rebuttal letter to detail your rebuttal in writing.
  6. Finally, await the decision.

5 Ways to Prevent Chargeback Occurrences

To help reduce and protect against e-commerce chargebacks, or prevent chargeback fraud, here’s a short list of some tips and tricks to help you out:

  1. Customer service

Having a team that can resolve the issue efficiently will prevent chargeback recurrences.

 2. Shipping options

It is important to offer a secure shipping option that ensures the customer feels confident in their package arriving safely.

 3. Customer satisfaction

It is key that you have a positive track record of handling customer disputes. This will ensure that customers will not be likely to file a chargeback.

4. Fraud detection

Have a robust fraud detection system in place, such as FUGU, to prevent chargebacks due to fraudulent transactions.

5. Order and transaction tracking

All orders and transactions should be monitored on a continual basis. That way, if a dispute arises, the transaction or order history is easily accessible and, if needed, a dispute can be lodged.

Contact FUGU Today

Remember, the most common chargebacks are related to customer dissatisfaction, and solving this will go a long way in preventing chargebacks. If you’re looking for a solution to fight chargebacks and ensure that they aren’t a result of your company’s error, contact the Fugu team today to schedule a demo and learn about how our chargeback prevention method can help you.

E-Commerce Fraud: Types, Detection, and Prevention Best Practices

E-commerce fraud, a broad phrase used to describe specific activities involving online fraud or scams, makes use of the internet to obtain traffic in fraudulently acquired assets. This type of fraud poses a serious risk to an online merchant’s business. Not only can e-commerce fraud cause financial loss, but it can also be disruptive to business operations and carry serious legal and reputational consequences.

To help you and your business become victims of fraudulent activity, this post will explain the main types of retail fraud and detail effective e-commerce fraud prevention techniques.

Table of Contents

How Is E-commerce Fraud Committed? 

  1. Payment Fraud 
  2. Friendly Fraud 
  1. iii. Account Takeover Fraud
  2. Prevention of E-commerce Fraud
  3. Stay Safe From E-commerce Fraud

How Is E-commerce Fraud Committed?

E-commerce fraud is committed in various ways. The basic idea involves nefarious actors carrying out criminal deception during an internet transaction, defrauding either the customer, the ecommerce merchant themselves, or a third-party in the process.

The three main types of commerce scams that are frequently leveraged by fraudsters are discussed below:

1. Payment Fraud

E-commerce payment fraud is any fraudulent activity aimed at getting unauthorized access to consumer information and accounts or obtaining goods and services without paying for them. E-commerce payment fraud can happen at any point between the consumer, the merchant, and the bank. For example, a hacker may get their hands on a customer’s credit card details and make unauthorized purchases – an activity known as e-commerce credit card fraud.

2. Friendly Fraud

E-commerce friendly fraud involves the fraudster making a purchase from a store, receiving the product, and filing an unauthorized credit card chargeback – claiming that the product was in some way faulty, damaged, or never arrived. The credit card administrator, in most cases a bank, determines that a legitimate chargeback claim has been filed, refunds the cost of the transaction, and subsequently the fraudster keeps both the goods and the original purchase amount.

3. Account Takeover Fraud

Account takeover fraud involves obtaining sensitive information like passwords, financial credentials, and payment information of a customer at an e-commerce website via various methods (such as phishing schemes or purchased on the dark web) to take control of a user’s account. The method of attack usually involves the perpetrators sending emails, making phone calls, or sending text messages to the victim that carry attached viruses files. This allows them to either change the details of the victim’s account, obtain access to other accounts owned by the user, make purchases using their funds, or even directly withdraw their money.

How to Prevent E-Commerce Fraud

There are several effective e-commerce fraud solutions and e-commerce fraud protection tools that you can employ to minimize the risks posed by e-commerce fraudsters, such as the following:

  • Use a tool like FUGU to help identify and prevent fraud.
  • Leverage SSL (Secure Socket Layer) encryption to protect your customers’ information.
  • Make use of a third-party password manager to keep all your passwords safe.
  • Check the order’s IP address to ensure the purchaser is in the same country as their selected credit card using monitoring capabilities like those possessed by FUGU.
  • Track transaction data, card numbers, billing and shipping addresses, and device signatures with fraud prediction capabilities like those of FUGU.

Stay Safe From E-Commerce Fraud

As online e-commerce transactions become more and more common, it is vital to protect your business from fraudulent activity. Thankfully though, with the fraud management and protection strategies detailed here, you can be sure to minimize and mitigate the risks posed by e-commerce fraud.