How eCommerce Fraud Prevention Software Helps eCommerce Merchants Avoid Chargeback Fraud

Chargeback fraud is a big problem for eCommerce vendors worldwide and costs them billions every year. Here are some ways fraud prevention software can help.

Disputing online transactions is as easy as clicking on a few links on an eCommerce platform. Banks prioritize customers and other financial institutions because customer satisfaction is more important to them than vendor satisfaction. So, even if customers have little proof of fraud or fault, banks side with them and issue chargebacks to vendors.

Trends show that retailers could lose $130 billion due to chargeback or card-not-present fraud by 2023. Even worse, almost half of online shoppers who report chargebacks do so again within a few months. So, how can eCommerce merchants protect themselves? They first need to understand why legitimate customers file chargebacks.

A recent study reported that the reasons online shoppers cite for filing chargebacks include:

• 30% report their credit card was stolen and used to place the order.
• 26% report never receiving the product.
• 15% report receiving the wrong product.
• 4% say they received products that didn’t meet expectations.
• 3% state that a clerical error such as an order being billed twice led them to report the incident.

Most online merchants agree that their biggest problem with chargeback fraud is caused by stolen credit cards. Fortunately, companies that get eCommerce fraud prevention software report a big reduction in chargeback fraud. Preventing chargebacks is a continuous process and software continuously monitors site activity 24/7 to help vendors recognize and resolve chargebacks and other types of fraud.

Automated Risk Assessment

Fraud and chargeback prevention software can stop suspicious transactions before they are approved by recognizing “red flags.” They assess link identifiers such as user name, the device being used, email address, shipping address and geolocation to confirm whether the order is legitimate.

Decision automation is possible via advanced artificial intelligence (AI) and machine learning programs that help chargeback fraud management software “get smarter” over time and also help companies reduce operating costs. More importantly, these tools do not compromise the customer’s online buying experience.

AI-driven technology can also be used to customize rules based on individual risk. For instance, an order placed by a frequent shopper will be approved immediately where an order from a new customer might take longer.

Dealing with Banks

Fraud management software can intercept transactions before they are officially deemed as chargebacks by issuing banks. It shares detailed transactional data with issuing banks that helps both parties recognize discrepancies and collects and processes as much transactional data as possible. AI-based algorithms enable it to gain important insights from the data that can be applied to improve risk assessment procedures.

Winning Chargeback Disputes

The last chance for vendors to redeem themselves after authorizing a “bad” transaction is to win the chargeback dispute by presenting strong transaction data. Therefore, it is a good idea to ensure that the fraud prevention software vendor you choose also offers chargeback management software and related services.