It has been said “opportunity is a bird that never perches”. This certainly holds true in the modern digital world we live in. Opportunities are aplenty, new territories are being introduced every day, and as a result—and not wholly unexpectedly—we have seen increased potential for fraud, and particularly chargeback fraud.
The rise of the digital economy has created many a success story with seemingly unlimited opportunities, and particularly e-commerce opportunities that see no physical boundaries. Businesses in the UK and further afield have taken advantage of being able to extend their reach for sales, in countries and currencies they may have not thought possible as little as twenty years ago.
Online fraud is now the most commonly experienced crime in England and Wales, according to a report published by the UK National Audit Office (NAO). Up to 1.9 million cyber-related fraud incidents were estimated to have taken place last year alone, with this number only expected to increase.
In fact, online fraud against UK retailers totalled an estimated £189.4 million in 2016, a 20% increase year on year, research from Financial Fraud UK recently revealed. The UK is not alone in this increase, with fraud against online retailers based outside the UK rising by 15% to £119.4 million
Chargeback fraud has for too long been considered a cost of doing business, just something you have to accept as a merchant. But it doesn’t have to be this way; you can stand up to chargeback fraud.
Prevention Is Better than Cure
What can a business do to protect itself from a changing marketplace and insulate its profits? There isn’t really one simple answer. Instead, several preventative steps should be taken to ensure that a merchant is best placed to deal with any eventuality, from stopping fraud altogether to dealing with chargeback fraud and friendly fraud.
- Customer service is key! When you have a strong customer service team, your customers are more confident that you will act and resolve their complaints or issues. This proactive customer service team also helps you get to know your customers and establish a strong relationship with them. When your customers trust you, they’re more likely to contact you with a problem, allowing you to resolve it directly rather than dealing with the lengthy and costly chargeback process. Make sure your customer service team is easily accessible by email, phone numbers, live chat, and social media access.
- Check once, twice, three times: Whether your customers are buying online, over the phone, or in-person, make sure that all customer information is verified and confirmed with the customer. Particularly important for online sales are the Ship To and Bill To addresses; if these addresses are different, don’t hesitate to contact the customer to confirm them. There are instances, of course, when customers buy gifts online and have them mailed directly to the recipient. One way to verify the gift scenario is to prompt for gift-wrapping when the addresses are different: if the customer declines the gift-wrapping, this should trigger an alert on your end. Be wary of shipping to overseas addresses or to freight companies. Take the extra time to verify the addresses being used before the item is sent out—this can save you a lot of hassle and headache in the long-term.
- The signature: it is well within your rights to ask for your customers to sign for packages upon receipt. Having a signature verifying that the item was received at the address entered on the order makes it much harder for the customer to commit chargeback fraud. There are many ways to do this, but one of the best methods is with an electronic signature page that the user must sign to receive the items purchased. This data is then stored in a secure database and readily available.
- The devil is in the details: The more detail and information you have about your customer transactions and returns, the better protected you are. To prove that a chargeback is indeed fraud, you must be able to provide supporting documentation or compelling evidence that clearly shows the customer authorised and received the order. Ensure you have vital customer information such as: phone number(s), email address(es), billing address, shipping address, date of transaction, electronic signature records, and package tracking information. Additionally, make sure your customer service team is keeping detailed records of all customer communication.
It Hasn’t Always Been This Way
The underlying provisions for how chargebacks evolved in the payments space were first introduced in the Fair Credit Billing Act of 1974, as a measure to protect consumers from fraudulent charges. As with many things, it is fair to say that chargebacks have evolved and changed quite a bit from their original intended meaning, with consumers learning how to use the chargeback system to their own advantage.
Chargebacks can make the cost of doing business too high for many a business for a variety of reasons, including:
- Credit and debit card companies experience increased costs. They transfer these costs to the merchants.
- Merchants suffer from lost revenue due to theft and from the costs of inefficiently fighting the chargebacks. These costs are transferred to the customer through increased prices.
- Customers are forced to pay higher prices, resulting in decisions to forego a purchase, or in other cases to commit fraud and theft. This cost is then transferred to the credit card and debit companies and issuers, perpetuating the cycle of chargeback fraud costs and consequences.
Looking for more tips on how to prevent chargebacks and reduce the cost of business? Contact the Verifi experts, and we’ll be happy to assist you.