Chargeback Fraud: How It Works & How to Prevent It?
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Chargeback fraud threatens many business organizations that depend on credit card transactions to generate sales. It does not matter whether you run a web-based business or a brick-and-mortar shop; it can damage you in many ways. You may lose your finances, goods, reputation, and premium customers as a result of the successful friendly chargeback fraud.
In the worst cases, companies suffer tremendous financial losses, and they have to shut down their business operations. Let's discuss more about chargeback fraud, its modus operandi, red flags and preventive strategies. The correct implementation of all these recommendations will help you protect your business from financial losses and keep it running.
What is Chargeback Fraud?
In simple words, chargeback fraud takes place when a customer makes a legitimate purchase but disputes the transaction later on for any reason. It may include unauthorized transactions, non-delivery of goods or services, duplicate charges, billing errors, fraudulent subscriptions or costly premium services, failure to honor refund or return policy. Some other causes of such scams are transaction errors, technical issues during purchase, bank or card issuer error, lost/stolen cards, etc.
In most cases, customers argue that the transactions were not authorized. They demand for money reversal. And if it is done, it means direct financial losses to business organizations. They have to bear the financial burden of the refund, including fees associated with the chargeback.
In general, chargeback protects customers from fraudulent transactions. But when too many customers misuse it for personal financial benefits, business organizations suffer tremendous financial losses.
How To Identify a Friendly Fraud Chargeback?
This type of financial fraud is quite rampant in today's world of online shopping, wherein individuals buy many goods and services regularly. Companies often fail to detect suspicious customer behavior and suffer financial losses in the end. Here are some recommendations. They must use tips to track chargeback fraud easily and take preventive actions.
- If a customer has requested too many chargebacks in the past, be alert. He/she might be doing it willingly to cheat businesses and save some money.
- Contact the product shipping company if a customer says he did not receive the product or service, although it was delivered to him/her at the specified address. It will clear the situation, enabling you to identify the fraud attempt immediately.
- Pay attention to the timing of the chargeback request. If a customer requests a chargeback long (a week/month) after receiving the product, it may be a cause of financial fraud.
- Analyze the reason used for a chargeback. If there is a mismatch between their two or more statements, it could be a fraud attempt.
- Check the uses of free subscriptions or trials. Many customers sign up with great enthusiasm and use the available service entirely for the specified period. When the paid subscription is about to begin, they cancel it by pointing out the deficiency in services. Always minimize the duration of free trials or subscriptions to avoid financial losses.
Some Chargeback Fraud Prevention Strategies
Improve Your Products and Services
The delivery of low-quality products or services is the main reason for chargeback requests. So, create a team to work on the weak areas of your business. Try to improve the overall quality of products and services as much as possible. When customers start getting the promised goods and services that are advertised on your website, naturally, you will see a sharp decline in chargeback requests.
Verify Customers
In today's highly digitalized world, cybercriminals are busy stealing people’s financial details and buying goods and services back to back. Not all individuals purchasing your products and services may be genuine customers. They might be professional swindlers, too.
So you must verify customers during the registration process. Double-check their legal name, residential and shipping address, phone number, email ID, etc. Request them to verify their actual identity by uploading a government-issued ID or using a one-time password, which is generated while making a transaction on your web platform. It will automatically remove fraudsters from your website and allow only genuine customers to buy available goods and services.
Clarify Your Product Return & Money Refund Policy
Always update your product return and money refund policy on your website. It will help customers to get updated information about your standard business operation process. They will be able to understand the circumstances under which they can apply for a chargeback. It will automatically eliminate their confusion (about the product return/money refund policy). They will not be able to generate any random request for a chargeback by exploiting any loopholes in your policies.
Keep The Billing Record Intact.
Always keep the billing record for purchased products and services for at least 2 months. This will allow you to cross-check numerous requests for chargebacks and quash invalid ones.
Fighting The Chargeback Scam With Roll Consults
Despite precautionary measures and alertness, the chances of friendly chargeback fraud are quite possible. Don't give your finances into the hands of scammers when you have the luxury of working with Roll Consults. Just explain your problem to our experts and allow them to work on your behalf.
They will examine all fraudulent activities and protect your business in different ways. With our help, it is possible to nullify the fraudulent requests for chargebacks in a jiffy. We also protect you and your business from different forms of online financial scams. The sooner you get started with us, the easier it will become for our experts to help you recover from losses.
Conclusion
Chargeback fraud is quite detrimental to business organizations. They lose their business opportunities, high-value customers, and money due to it. The proper implementation of the above-mentioned chargeback fraud prevention strategies will help you combat the scam effectively & protect your interest in the best possible way. With its fraud prevention services, Roll Consults protects you from chargeback fraud. It will let you enjoy reliable protection against financial scams and may also help recover from losses.
