When dealing in high-risk industry, it becomes crucial to detect frauds and avoid chargebacks. There are some tools and techniques that can be used to do this job but what if it is the case of friendly frauds. Where credit card number, address and even name of customer is correct. It is difficult to find out friendly frauds and avoiding them. According to study, 20-30% of total fraud losses are due to friendly frauds.
Friendly frauds
Oftenly know as chargeback frauds. Occurs due to wrong intention of customer. Here a customer purchases product online with credit card and files a chargeback from the issuing bank against the purchase after receiving product. Issuing bank after investigation cancels the financial transaction made by customer through credit card. The customer receives money spend and go to keep the product as well. Although merchant can dispute chargeback .But it is wise to use chargeback prevention alerts and techniques to avoid it from the root
Unluckily. High risk merchants cannot depend upon credit card companies to protect them against such friendly frauds. Merchants are of their own in this. But there are ways to detect friendly frauds and prevent chargebacks; few of them are as following:
- Payment agreement: By adding a simple payment agreement to checkout process, merchant will be benefitted in two ways:
- Discouraging fraudsters
- Legal edge if chargeback occurs
Most businesses already have documentation in place but if you have not done it yet. It is high time to revamp your checkout process. There are affordable third-party options available. Which can help merchant to get it done by putting minimum efforts or merchant can also opt for create it himself. Chargeback expertz is one of such companies. Which collect data regarding customer and purchases made and stores it securely for future reference.
Predictive device identification tool
To fight against first party fraud, Predictive analysis, payment & transaction monitoring has been proven as great help for high risk merchants. By using these softwares the activity of the customer can be checked before the fraud is perpetrated. If the identification of customer is done as suspicious and as a result risk can be reduced to the issuing institution.This software use advance technology and are categorized as third generation device identification software. These are cookies free solution that allows merchant to expose intention of customer. Although these softwares are not 100% accurate and can detect around 50-60 percent of customers engaged in friendly fraud.
Bad customer list
It is good practice to use negative customer lists to avoid friendly frauds but this method should be adopted with utmost care. These lists are shared across network and sometimes can be created by individual companies for future reference. These types of lists would not prevent fraud before the initial instance. But can be helpful for the companies to avoid being victimized by same fraudster. But before going for it, do check with local consumer protection laws.
Size of the order
Big order make merchant happy. But you should keep an eye on such customer especially if for expensive products. It might save your business some bacon. By using fraud prevention softwares and techniques you can not only catch fraudsters but can save a lot more per transaction.
Track order Country wise
International orders are more likely to hot be friendly frauds as compare to domestic purchases. If we take out the percentage of international fraudsters over domestic fraudsters it is around 2% / 0.5%. In this case merchant have two options. Either to add extra security and scrutiny to international orders before being processed or merchant can choose extreme route and can eliminate international orders altogether.
Bottom line
- Verify customer’s address with the address associated with credit card
- Choose Shipment service who can verify signature of customer as well as tracks shipment
- Communicate with customer and personalize the sale
- Return policy should be clearly stated on your website
- Analyze sales record
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