9 Easy Steps to Prevent Credit Card Chargeback Fraud

credit-card-processingCredit card fraud is a serious issue for consumers and business owners alike. An increasingly new practice has arisen that’s causing concern for small business and e-businesses alike. It’s known as chargeback fraud, and it’s being performed by seasoned and novice criminals alike. While it may not seem as serious as other forms of fraud, it’s concerning for everyone involved and business owners need to know how to protect themselves and their business from this criminal practice.

What is Chargeback Fraud?

Consumers who engage in chargeback fraud will often claim a purchase was not authorized on their account and demand a refund. Or, alternately they will claim they ordered a good or service and it was never delivered and therefore are entitled to a refund. Since the “customer is always right,” the task of proving the purchase was authorized or the good was actually delivered falls on the bank providing the financing. If they cannot prove fraud, they’re forced to pay back the purchase amount and additional fees and fines along with it.

Many small businesses provide their own financing, or have limited funds within bank accounts, and paying these small fees over time can add up to bouncing funds and more fines for the business.

Merchants should be aware of chargeback fraud as the practice is on the rise. A 2012 study showed that approximately 60 percent of fraud claims are actually “friendly fraud,” and can result in merchants losing $2.33 for every $1.00 a customer claims has been lost.

Although this friendly fraud is difficult to recognize, these practices can help stop customers before they attempt to fraud you out, and assist in determining if a crime has taken place.

1. Select Reliable Payment Platforms – There are several platforms that are highly reliable for e-businesses, and some even offer fraud monitoring services as part of their packages.

2. Take Advantage of Security Codes – each credit card comes with a 3- or 4-digit code in addition to the regular credit card number. Ensuring customers are required to enter these numbers when making a purchase can help you confirm the validity of their card.

3. Track and Monitor Suspicious Practices – take caution when processing large orders and keep records of past fraudulent attempts to prevent similar situations in the future. Also keep track of customer information; if a customer requests a refund once, then several months later requests the same type of refund, this should raise red flags.

4. Provide Quality Customer Service – every order should come with a tracking number if being shipped, and you can even request signature confirmation upon delivery. For services, provide receipts to customers and always keep copies for business records as well.

5. Strong Passwords – sometimes customers and businesses are victims at the same time. To protect both you and your customers during online transactions, require strong passwords to protect both customer accounts and your business as a whole.

6. Stay Compliant – maintaining PCI compliance can help your business protect itself from potential fraud by ensuring customer data is protected in addition to all business transactions. Not only is this step helpful, it’s mandatory for all businesses.

7. Keep Websites Up-To-Date – once you’re business is PCI compliant and you are using a secure payment platform, make sure product URL’s are up to date and stay safe and secure throughout the order process. A security auditor can help with this process, or practice orders to make sure product URL’s are available all throughout checkout and afterwards during the tracking and shipping process.

8. Education for Staff – employees should be aware of security practices and how to watch for fraudulent practices and behaviors. The more vigilant your staff, the better chance you have of catching a fraud attempt in progress.

9. Details for Receipts – for e-businesses, provide confirmation emails that include detailed information about the charges that will appear on a bank statement. For personal services or transactions made in a store, provide receipts and keep records of the transactions and how they should appear on the card in order to fight back if someone reports a fraudulent claim.

Being vigilant will not only ensure the success of your business, but can prevent you from friendly and malicious fraud alike.

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