Chargeback is the word that is known to every business owner. There can be different reasons why a client decides to request a chargeback, but it is also common for people to take advantage of this system. Chargeback fraud is becoming more and more prevalent in online shopping and if you have a business, it’s important to take measures. Here are some steps you can take for chargeback fraud prevention.
What is chargeback fraud?
Chargeback takes place when a customer requests their bank or credit card issuer to return the cost for the purchase they made online. It is considered a fraudulent activity in the following cases:
- A customer received their purchase but claim they haven’t;
- They authorized the transaction but later try to refuse it;
- They claim that they wanted to cancel a transaction but couldn’t;
- They say that they returned the product but didn’t get the money back.
These are only some of the ways people abuse the chargeback system. This can be extremely detrimental to a business, especially since you have to pay a chargeback processing fee in addition to losing money.
What should you do to prevent chargeback fraud?
Some of the ways you can reduce chargeback fraud include the following:
1. Pay attention to suspicious orders
It is important to notice any unusual activities in your online store. For instance, you may notice that someone has made a huge order, which is not common in your store. Or, you can see that the shipping and billing addresses are in different parts of the country. Paying attention to such signs can help you notice potential fraud.
2. Use chargeback prevention tools
You can use software with fraud prevention features, such as device fingerprinting, to minimize the risk of fraud. Such software automatically notices and flags any unusual activity in your store and thus makes it easier for you to take measures.
3. Have a clear return policy and accurate descriptions
To prevent friendly fraud, you should have a detailed return policy on your site. This will increase the chances that a person will come directly to you instead of going to the bank. Also, your product descriptions should be accurate and fully show what you sell, so there is no misunderstanding.
4. Use proper address verification and confirm orders
You should have an address verification system (AVS) on the site that analyses whether the customer’s billing address is the same as the one connected to the credit card. A transaction can be rejected if this is not the case.
5. Send email confirmations
It is a good idea to send email confirmation letters to customers after they make orders. This can be one of the ways to prevent friendly chargeback fraud and remind customers that they made a purchase.
Reduce the risk of chargeback fraud
It is important to start preventing chargebacks the moment you start your online business. It can be extremely risky not to pay attention to this problem, so it’s better to be overly prepared. With the combination of these methods, you can minimize the number of chargebacks.
Do you have other suggestions? How do you deal with chargebacks? Share your thoughts in the comments below.
