Chargeback fraud is not a pleasant thing for merchants of all categories. It can be a friendly fraud when a customer is not happy with their purchase and asks for a refund or a scammer who wants to get a free item. In both cases, a chargeback may cause losses. Usually, it’s even higher than the primary payment cost, so the chargeback prevention is highly significant. Let’s look through the chargeback reasons and prevention methods for chargeback fraud. When you understand why the fraud happens, it’s much easier to cope with it.
Chargeback Reasons
Some reasons for the fraud can be unexpected and simple to solve, but merchants often don’t pay attention to them. Here is the list of main chargeback fraud causes:
- Unclear transaction description;
- Low payment and account protection;
- Lack of support service;
- Lack of analyzing the chargebacks disputes.
Many customers ask for the payment return if they don’t see a clear description of the transaction and consider it a fraud. Also, if your support team couldn’t help a client, there’s a higher possibility for the dispute opening. Any business may have additional reasons for the chargeback. That’s why it’s essential to analyze chargeback fraud that has already happened. Luckily, there are methods to solve these issues and prevent refund disputes.
How to Prevent Chargeback Fraud?
After the customer has requested chargeback, it’s more difficult to reduce the losses you may get. So, prevention is more effective, especially when you improve your service in this way. Let’s look through the tools and methods that will help you to increase fraud protection.
VMPI Prevention tool
VMPI product is a well-built fraud prevention solution that works really simply. When a customer sends a request for a chargeback, the VMPI integration redirects this dispute to the merchant. It automatically compares this transaction with others and makes a statistic to better understand the reason for chargeback fraud. Then, the merchant gets a notification about the dispute. Now you can solve this dispute and prevent future chargebacks.
Thanks to this mechanism, the VMPI tool can also detect fraud before the client opens a dispute. The information, which the network gets from each chargeback, is monitored and analyzed. So, the unusual activity can be detected, and the merchant will get a message about this. In addition, the company can improve its service by understanding the most popular purchasing issues.
Ethoca chargeback prevention
The Ethoca tool works quite similarly to the VMPI one. A customer sends the request to the issuing bank, and then it is redirected to the merchant. After that, the company can make a refund and close this dispute. The issuing bank doesn’t initiate the dispute, so it doesn’t influence the business statistics. It’s significant because the higher the chargeback statistic you have, the more you should pay for each transaction. Also, your merchant account can be canceled by Visa or Mastercard.
Ethoca is more useful if you have a lot of friendly fraud chargebacks. It protects you from the additional losses when you have to deal with the issuing bank. However, if you want to prevent criminal fraud, it’s better to choose the VMPI tool. It analyzes the data more and helps you to stop the issue before the dispute starts.
Keep the data secure
A lot of fraud happens when scammers steal the account or credit card information. So, your customers and your company will be more protected if you set a reliable security system. For example, use two-step verification when the client logs in to the account. Or a mobile phone confirmation while making a payment. If many workers have access to the customers’ database, you should increase its protection level too. The scammers can get the data here too, and the consequences are unpredictable.
Improve support service
Some percent of the issues can be solved before the customer asks for a money return. For instance, they didn’t like the delivery service or they didn’t understand why the specific transaction was made. If they can contact the support team easily, such problems can be closed at once. But in case your support service doesn’t answer soon, clients are more likely to apply for a chargeback.
Make payments clear
Anything can cause chargeback. Customers may be unsatisfied if they don’t see the description of their transaction. Some banks may take a fee while transferring the money. Or the shipping fee for some regions is higher than you indicated. You should give all this information before the client makes a transaction. Also, you can add a descriptor for each payment. In this case, there won’t be unnecessary questions, and the customers will be pleased.
Analyze and reduce merchant errors
In some cases, merchant errors may occur, and people use it to ask for a refund and get a free item. The VMPI system will help you with analyzing the chargeback issues. And you will see where you have made a mistake and avoid it next time.
Teach your staff
It’s also significant to teach your staff to analyze the chargebacks’ disputes and communicate with the clients. The tools help you reduce only about 70 percent of fraud cases, so your workers may notice what the online instruments can’t. It’s effective to monitor unusual activity.
For example, when customers buy a huge number of one product. Or when they choose a different shipping address than usually. In this case, you may contact the client and ask for the purchase confirmation. And when your workers are instructed to do this, the percent of chargeback decreases a lot.
Keep Your Business Safe from Chargeback Fraud
The best way to protect your company from a high level of chargeback fraud is to combine different protection methods. You can get a VMPI or Ethoca tool, improve the support service and account protection – all these steps will increase the chance to stop criminal and friendly chargebacks. Also, it’s highly essential to analyze the reasons for the fraud that occurs in your business. The more you know about chargebacks, the easier it’s to cope with them.
