Chargebacks are payment reversals, similar to refunds, that happens whenever the card holder sees a transaction in his credit card bills and disputes that. Financial penalties are involved for the merchants whenever there are chargebacks. To reduce chargebacks, merchants should pay close attention to this article and read more.
Normally, chargebacks happen whenever the credit card is used in a payment that is not authorized by the card holder, meaning this is an actual fraud case.
Another form of chargeback is called the friendly fraud or chargeback fraud. People make purchases using their own credit cards and then file a chargeback after receiving the purchased items. Friendly fraud is actually the opposite of what you might think. The alternative phrase chargeback fraud is the more accurate description.
Reduce chargebacks due to actual fraud
Online stores are great for credit card frauds due to the Card-Not-Present (CNP) environment. It’s much hard to verify the identity of the credit card holder. Frequent data breaches also means that there are a lot of stolen credit card info out there. As a result, merchants will see more and more chargebacks due to actual fraud.
While merchants are unable to dispute such cases of chargebacks, FraudLabs Pro can help to reduce chargebacks. Arguably, the most important part of FraudLabs Pro fraud screening service is the Merchant Network. Merchants using FraudLabs Pro can contribute any fraud cases found into blacklists. Blacklists data are immediately available to protect every merchant using FraudLabs Pro.
FraudLabs Pro also has rules to trigger manual review or rejection of orders automatically. One useful rule is the distance between the billing address and the shipping address. Merchants should configure this rule to trigger an order for manual review if the distance is over a set threshold.
Another feature of FraudLabs Pro is useful to deter fraudsters. The SMS verification part of FraudLabs Pro should be used to require SMS verification during order checkout. Often, fraudsters will be hesitant to expose their mobile phone number.
Reduce chargebacks due to friendly fraud
This type of chargeback, the friendly fraud or chargeback fraud, is a pretty common occurrence too. A customer will purchase something from an online store using their own credit card. Upon receiving the goods, they will then file a chargeback. They will often use excuses such as the goods were not delivered or were defective. Merchants will only fight such chargeback requests if the value involved is big enough to justify the time and effort needed.
To prevent such users from making purchases in the future, merchants can blacklist them via the Merchant Network. By blocking purchases from these types of users, merchants can reduce chargebacks significantly.
It will help to also configure the FraudLabs Pro rules to flag orders above a certain amount for manual review. This will discourage the potential fraudsters since merchants can ask them for identity verification before releasing the orders.
Merchants won’t be able to totally prevent chargebacks but by using the power of the FraudLabs Pro fraud screening service, they will be able to reduce chargebacks to a more manageable number. The free FraudLabs Pro Micro plan allows merchants to screen up to 500 orders per month. Merchants should use this free plan to get started on reducing chargebacks. When business orders exceed the free tier, merchants can just upgrade to a paid plan for more fraud protection.