Beware of chargebacks! It’s the holidays!

Chargebacks Alert During the Holiday Season

The last few months of the year is a busy time for merchants due to the holidays. Colloquially, the day after Thanksgiving is called Black Friday which marks the start of the Christmas shopping season in the United States.

Merchants will heavily slash their prices to take advantage of this huge rush to buy the trendiest or hottest-selling products. With customers looking to buy many presents for their loved ones, friends or colleagues, this period is when merchants earn most of their annual revenues. In 2021, Cyber Week (the 5-day period encompassing Thanksgiving to Cyber Monday) brought in $36.4 billion in revenue in the US alone. This means that merchants should also start paying special attention to protect their business from a large influx of chargebacks and frauds during the busy holiday season.

Holidays mean increased chargebacks and frauds on online stores

As with brick-and-mortar shops, online merchants encounter similar crowds on their e-commerce sites. They often have to scale up their IT infrastructure to cater to the huge surge in online traffics.

Almost everyone will be hunting for the best gifts for the special people in their lives. Hence, merchants will be overwhelmed with trying to fulfill all of the online orders.

Unfortunately, there is a dark side to the huge explosion in online sales. Merchants will encounter a significantly higher number of fraudulent purchases. Fraudsters are counting on the fact that the fraud checking department of the various merchants are overworked.

As a result, more possible fraud cases will slip through. Being opportunists, such malicious actors will try their luck and make as many purchases with stolen credit cards as they can before they are shut down.

So, on one hand, merchants are reaping a huge profit from the massive sales. However, if they are not careful, they will also lose a huge chunk of their revenue to chargebacks if they don’t handle frauds diligently.

Hiring more people to review orders for fraud is a big no no. For massive e-commerce websites, there are potentially millions of orders being made daily.

How can mere mortals be able to screen so many orders properly?

Losing money and reputation due to chargebacks

Chargebacks – payments that are reversed by a cardholder’s bank as a result of a dispute – are not good for any business. Getting hit with hundreds or thousands of fraudulent purchases means the same number of chargebacks.

Once the level of chargebacks hits a certain threshold, payment gateway providers will block the merchants from processing any more payments. If an online store cannot process online payments, there will be losses to the merchant.

Financial losses from chargebacks or the inability to process further payments can severely cripple an online business. Not to mention the loss of the store reputation among the customers. Therefore, merchants should also prepare themselves to fight chargebacks with evidence.

After all, who wants to shop at a website that is not able to process payment?

Automated fraud screening solutions to reduce chargebacks

Manual fraud checking is not sufficient in this day and age. More and more people prefer to make purchases at online stores.

With online stores, the number of items available for purchases far surpass any physical store’s offerings. People love the convenience of online shopping because it’s easy and mostly hassle-free.

Merchants often throw in free delivery as well during such promotional periods. Therefore, online merchants need to seriously consider using an order screening service to check for frauds.

Order fraud screening services like FraudLabs Pro can screen an online order within a few seconds. Compare this versus a human fraud checker who may need a few minutes or longer to check various order information against fraud data sources.

Benefits of using fraud screening services

IP geolocation detection

IP geolocation detection is one of the common features provided by most of the fraud prevention services. The geolocation data can be used to compare the customer’s IP location against the billing address they’re using in the order.

Any discrepancy between the IP geolocation and the billing address means a manual fraud review is required. Such red flags are pretty common in fraudulent online orders.

Common sense dictates that if you see the IP geolocation for the buyer is in Nigeria but the billing address is for New York City, the merchants should be paying closer attention to this order.

In some cases, it could be a real user making a purchase while traveling overseas. Fortunately, FraudLabs Pro has custom rules to flag orders matching such criteria for manual human reviews.

After that, it’s as simple as calling or emailing the buyer for identity verification.

Proxy server detection

Another useful feature in fraud prevention services is proxy server detection. Nowadays, fraudsters are tech-savvy and try to hide their geolocation by using proxy servers like VPN servers.

Anyone making a purchase on the online store while using a proxy server definitely warrants further reviews by a human being. As before, just a simple identity verification can quickly resolve the validity of the order.

Transaction velocity checks

As previously mentioned, fraudsters will make purchases with stolen credit cards. The transaction velocity checks would be helpful along with various data blacklists. It allows you to analyze the transaction data and recognize the patterns of normal user behavior which may indicate fraud.

Using the velocity checks, merchants can limit the damage done by potential fraudsters. By setting a rule to trigger manual reviews of orders if the number of transactions by a user exceeds a set threshold, malicious actors cannot inflict unlimited financial damage by making non-stop purchases.

Continually updated credit card, email and name blacklists

Upon discovery that a buyer is a fraudster, the merchant can blacklist such users. The credit card, email and name used by said fraudster will be stored in the FraudLabs Pro blacklists.

Once in the blacklists, other merchants using the this fraud screening service is protected from that particular fraudster. This is the feature provided by the Merchant Network where every fraud data shared by each merchant will collectively help others on the network.


Without a doubt, an automated fraud screening service is a must for any serious online merchant.

FraudLabs Pro is one of the reliable fraud order screening service provider that continually evolving to always stay one step ahead of fraudsters and their ever-changing tactics. You can secure your business and prevent financial losses due to frauds by screening up to 500 transactions every month without paying a single cent. Get started with the free FraudLabs Pro Micro Plan.

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