Types of customers and fraud:

With all new vendors, we must start from the ground up. From the moment our partnership begins, we attempt to assess what types of customers our vendors will be receiving. For the purpose of this study, we reviewed one of our new vendors and will now refer to them as “Supplier A“. In the case of Supplier A, several discrepancies were located in each order placed through their system. We noticed discrepancies between the billing information and the IP addresses, as well as discrepancies within our internal tools. While not unusual to find orders with these types of discrepancies, we did find that each new order placed had very similar discrepancies. This made it appear that the same person or group was attempting to circumvent the fraud review process and get by undetected. When we noticed such a large percent of Supplier A’s orders with these same discrepancies we then proceeded to take a higher level of caution with all new orders reviewed. It appeared that the trends changed slightly, receiving orders with matching billing addresses and IP addresses but suspicious email addresses as well as substantial and consistent discrepancies within our internal tools. This may have been the work of the same person or fraud ring placing the original orders, but it is also possible that the vendor was being hit by other fraudsters.

Fraud types and the likelihood of fraudulent activity:

Supplier A is providing a virtual private network or VPN service. A VPN service is both an intangible service and easily accessed long before the legitimate cardholder is likely to notice this fraudulent transaction, making this service a prime target for fraudsters. Knowing that this service is highly likely to attract fraudulent activity, we will be more prepared and inclined to contact the customers to provide a more in-depth review of the customer before reaching a conclusion.

Friendly fraud:

Unfortunately, everyone is at risk of friendly fraud. A VPN service, however, is less likely to receive this type of fraud than a vendor providing a product or service of a more personal nature such as dating or adult products. Friendly fraud is also the most difficult type of fraud to catch, as the correct information is generally listed on the order. The customer is more likely to report this as fraud if they do not recall the purchase or issuing a charge back instead of requesting a refund. Suppliers should keep records of the order, communicate with the customer, and save any other pertinent information to aid in disputing these charges when the time comes.

How can we minimize the risk to the vendor and the overall results?

The best advice that we can offer to any vendor is to be proactive with their own orders. Review any order, even briefly, to look for discrepancies listed on the vendor page or the information listed within their own system that we may not be able to access. If a vendor is suspicious of an order due to the discrepancies they find, or for any other reason, we encourage them to research it further. One of the most readily available tools around is the internet, and there are several helpful tools that are free for anyone to use. Google maps will help you know if the address listed is a home, business, or even an empty field thanks to the satellite images. The directions feature is also quite useful, letting you plot the distance between the billing address and the IP location. An IP location 500 miles away from the billing address tends to be a bit more suspicious than one within 50 miles. Another useful tool is whois domain tools this lets you check where an IP is coming from or search on an email domain to find out additional details. Is this an established business that has been around for years, or was the domain just created recently to appear legitimate? There are countless tools available to anyone if they wish to search for information about a customer. Our vendors are also more than welcome to contact us by emailing fraud@2co.com through our ticket system or by calling 877-294-0273 to express concern. We will take an additional look into the order with any new information provided. Once a vendor is aware of the types of fraud that they receive, they are more likely to understand and locate the types of fraud that they may be getting.

The world of fraud is ever changing and while we would like to say that we can prevent every instance of fraud, this is unfortunately not the case. Only by working together will we be able to provide the most effective protection.

Mike and JR – Fraud Department

All types of e-commerce companies have dealt with friendly fraud at one time or another. Within the past few years there has been an increase in deliberate friendly fraud. There are a few factors that have contributed to the rise in deliberate friendly fraud; such as the shape of the economy worldwide, individual financial situations, and consumer’s knowledge of how to take advantage of the banking system. Unfortunately, the economy can impact a person’s financial stability which can cause this type of deliberate fraud. What someone can afford today, they may not be able to afford tomorrow. This can lead them to drastic measures to hold on to any funds they have.

Another type of friendly fraud are fraudsters that regularly manipulate the system to get their products for free. Since these fraudsters are constantly finding new ways to use the system to their advantage, there is no real way to avoid this type of friendly fraud from happening. Basically the only thing that can be done is to try to protect your business as much as possible.

Accidental friendly fraud is when the consumer mistakenly disputes a charge and doesn’t take the incentive to rectify the situation. In many cases it can be helpful to contact the customer directly to give them additional information about the charge and the product or service that was purchased. Accidental friendly fraud can be easily fixed. Once the consumer realizes they made the mistake, they remedy the situation. The following suggestion may help to avoid this type of friendly fraud. If your business uses a reseller, a payment processor, or any type of third party billing service; such as 2Checkout.com, PayPal, Clickbank, WorldPay, or Google; it is very important that your customers are aware of this. Placing this company’s information on your website and on your receipts will help customers recognize the charge on their billing statement. An additional feature available to 2Checkout.com suppliers is the use of a “soft descriptor”. Each supplier can enter their own “soft descriptor” to be included within the description sent to the credit card companies when a credit card is billed.

With all of this in mind, before you send a product or provide a service to a customer, make sure you know the customer. If you don’t know them or are skeptical, use the tools on the internet or any other tools made available to you in order to screen the customer. You may request that the customer fax information to you such as their photo ID or a utility bill. Additionally, you may contact the Fraud Department to request that 2Checkout.com require additional documentation from the customer before providing the item(s) ordered.

These preventative methods may lower the chance of receiving a fraud related chargeback. However, even with doing all of this, there is really no way to predict cases of friendly fraud. It is a good idea to prepare your business for these special cases. The best way to prepare is to keep all documentation about the customer, the product/service that was provided, and any contact you have had with the customer; as these may be needed to challenge a chargeback. Some examples of documentation you should retain are:

• Proof of Successful Download
• Proof of Product Usage (Login, IP, etc.)
• Signed Terms Of Service/Contract
• Signed Proof of Delivery/Delivery Confirmation
• Tracking Pictures of Shipped Products
• Detailed Description of Product

Since there is no real way to stop this type of fraud from happening, a good business practice is allocating funds to offset any possible losses due to all types of friendly fraud. This can help ensure your business continues to grow while you are trying to recoup the loss of funds from the chargeback. All online companies spend time and money looking for fraud, but fewer companies spend enough time gathering the information required to fight friendly fraud. As this is “Fraud Awareness Week” we decided to take this opportunity to remind you that friendly fraud is out there and can negatively impact your business. With all of this information, you can be better prepared to fight friendly fraud.

Amanda and Leona – Disputes Department

“This weeklong campaign encourages business leaders and employees to proactively take steps to minimize the impact of fraud by promoting anti-fraud awareness and education.”

Share your ideas with us this week in a series of articles that will help define different types of fraud, highlight 2Checkout’s role in fighting fraud, and what we can all do to reduce the amount of fraud. By working together and communicating our ideas we can make online shopping safer for both customers and merchants.

The first, and probably the most important, is good customer service. Reply to customers contacting you directly or contacting 2Checkout.com and provide assistance to those customers. If the specific issue that a customer is having can’t be resolved offer the customer a partial or full refund of their order. Take advantage of our Customer Care Center by posting our contact information on your website.

The second thing that vendors can do to decrease disputes is to confirm that the customer received the order and that they were satisfied with the product/service they received. This can be done several different ways and depends on the type of product being sold. For tangible goods get tracking numbers on shipments, send those tracking numbers to the customer, and after the order is delivered contact the customer with a short email asking them to confirm that they received the item and that they are satisfied with the product. For intangible items such as software, memberships, and hosting service send the customer an email asking that they let you know how the product is working or asking if they have any questions about accessing the service.

It is also important that vendors review their incoming orders. Conduct your own fraud review and contact our fraud department at fraud@2CO.com if anything looks suspicious. The fraud department can review the order or contact the customer for further verification if needed. Also, watch for multiple orders placed with the same customer information within a short period of time. Simply canceling duplicate orders that are placed mistakenly will lessen disputes.

For more helpful hints about lowering chargebacks please review the article, How can I help to reduce the number of customer disputes?, in our knowledge base.

As everyone knows, nothing has 100% guarantee and a chargeback could still occur. For each chargeback that 2Checkout.com receives the credit card provider charges a fee. Some of these fees are passed on to you. If a chargeback does occur and you would like to challenge it, please contact our Dispute Department for assistance. When contacting our Dispute Department please provide all documentation that you have regarding the chargeback. The Dispute Department will review the information and notify you if the documentation is sufficient enough to challenge the dispute. If the documentation is nonsufficient, we will explain why in hopes of making you better prepared to challenge any other chagebacks.

If the order was placed in United States currency (US Dollars):

• 2Checkout.com receives notice from the credit card provider after the dispute has been completed.
• 2Checkout.com sends notification to the vendor of the chargeback and the reason for said dispute.
• The vendor has the option to either let the dispute stand, contact the customer to resolve the dispute, or contact 2Checkout.com for assistance with challenging the dispute. If a vendor would like to challenge the dispute they need to contact 2Checkout.com’s Dispute Department within 10 days of receiving the notification.

If the order was placed using any currency other than US Dollars:

• 2Checkout.com receives notification from the credit card provider that an account holder has initiated a dispute.
• 2Checkout.com sends notification to the vendor that a charge is currently being disputed.
• The vendor has the option to either let the dispute stand, contact the customer to resolve the dispute, or contact 2Checkout.com for assistance with challenging the dispute. If a vendor would like to challenge the dispute they need to contact 2Checkout.com’s Dispute Department within 7 days of receiving the notification.
• Once a non-US Dollar dispute has been completed, neither 2Checkout nor the vendor can challenge the dispute.

Additionally, 2Checkout.com occasionally receives notification from the credit card provider that the account holder is inquiring about a charge. On behalf of our vendors 2Checkout.com will send a copy of the receipt to the credit card provider. 2Checkout.com will also inform the vendor of the inquiry to give them the opportunity to contact the customer to resolve any possible issues that could result in a chargeback.

If there are any questions about the dispute process, please contact the Dispute Department by email at chargeback@2CO.com or by using the contact information provided here.

The most common reasons for chargebacks are:

• Account holder’s credit card number was compromised or used without the account holder’s permission.
• Account holder does not remember the purchase or does not recognize the charge on their statement.
• The customer mistakenly placed multiple orders.
• The customer was not satisfied with quality of the product/service that was received.
• The customer was advised that they would receive a full or partial credit and that credit was not successfully issued.
• The recurring billing was not stopped at the customer’s request.
• The customer did not receive the product/service that they ordered.

A key aspect of this information is active tracking of refund and bank dispute amounts and percentages. These percentages play a key role in 2Checkout account evaluations, as well as determining the level of the rolling reserve that is applied to accounts.

2Checkout maintains the following criteria for acceptable refund and bank dispute percentages:

• Refund amounts should not exceed our acceptable limit of 10%.
• Bank Assisted dispute levels should not exceed our acceptable limit of 1%.

Percentages above these levels may lead to reserve increases, and can be detrimental to the overall profitability of your company.

Refunds and Bank Assisted Disputes that are deemed fraud related are weighted differently than those issued for service related issues, yet these stats should be monitored as well.

2Checkout encourages all vendors stay current on their account statistics and are proactive in using these tools to ensure the overall health and good standing of their accounts.

It is definitely exciting to be getting such great input through the new 2Checkout forum.

Topics like consumer fraud will be introduced, covered, reintroduced and covered again and again. The short (and often unacceptable answer) is that there really isn’t an ideal solution for the card-not-present merchant of today regardless of product type: tangible or intangible.

Why not? There are two big reasons:

The first is that US Legislation has historically been written to protect the consumer from big, bad corporations. With the recent success of political lobby organizations this trend has begun to shift but, as of today, there really isn’t a good solution in site. We dislike consumer fraud as much as you do. We also strive to make our voice (and, subsequently, yours) heard by participating in a number of merchant organizations who do nothing except lobby the credit card associations and major-league processors to consider change.

A second reason is that card-issuing banks spend a lot of money trying to get credit card customers and they want to keep those customers as happy as possible so they don’t get an account with someone else who give them their money back whenever they call. Oversimplified maybe but also very relevant.

In the meantime, there are steps you can take to protect yourself and to ensure better quality service from 2Checkout.com.

First: If you feel you have been under-served in any manner by a representative of 2Checkout then please submit a ticket directed to a TEAM LEAD or SHIFT MANAGER. Reference your previous ticket, email or the date and time (EST) of your previous interaction and the matter will be investigated. Quite honestly, nothing irritates me more than complaints of poor service from a 2Checkout associate. I am not referring to instances where the information may not be to your liking but you should always feel you’ve received quality care.

Second: If you ship tangible goods always provide us with good tracking information whenever possible as soon as possible. Do not provide fraudulent dates that can and will be given to a customer who contacts us for shipping verification. That is a sure way to get an order refunded and to accrue negative risk markers on your account.

Third: If you ship tangible goods and have a refund policy enter a ticket and request that the policy be appended to your 2Checkout customer service information. Every call or ticket about a product supplied by you will subsequently have this information displayed during the investigation process.

Fourth: If you provide either digital or tangible goods and feel you have a higher than normal number of orders refunded without just cause submit a ticket and request that you be assigned a D.A.R. (dedicated account representative). Include your preference as to the best usual contact time, method and even language and we will review your status and determine if a D.A.R. is warranted on either an interim or long-term basis.

Fifth: Consider legal action. Yes, 2Checkout will consider legal action against an individual who has engaged in fraud but only if the evidence is there for us to use and if the costs of retrieving the purchase price justify legal intervention.

Sixth: Steer customers to new payment methods such as ATM Direct (online PIN-debit), Bill-Me-Later and FxSource (soon to return). New products are entering the marketplace primarily because the traditional payment methods are weighted so heavily in the consumers favor (not to mention interchange increases!). The first two products are directed to the US consumer. The latter is an option for the international consumer. All have much more labor-intensive processes in place to help guarantee that a customer was truly compromised. Consider some discount or upgrade options for customers who use these methods.

This is a topic that encourages frustration on all sides. 2Checkout is responsible for ensuring that our vendors are provided with a valuable service and with guaranteeing that consumers want to shop from 2Checkout suppliers. Our processors and the associations require us to keep chargeback utilization at acceptable levels. The associations haven’t taken steps to utilize non-traditional information in chargeback disputes. Vendors often are not provided with sufficient opportunity to rebut a consumers allegations. We’re working hard and are open to (almost) any suggestions you may have on how to handle our role of middle man better. Sorry, but “don’t issue refunds without authorization” isn’t going to make it very far up the ladder.

I’ll encourage our Risk Department to come up with an article of tips and tricks to help reduce the impact of consumer fraud.

In the meantime, please feel free to offer up your constructive criticism and we’ll be listening and responding. There are a great many terrific feature offerings coming very, very soon and we want your ideas to strengthen and improve our existing offerings while they are in development.

Thanks!

There will be a $50.00 USD fee for receiving a fraud related chargeback for any order that a vendor requests to be reinstated after it was failed by 2Checkout.com’s fraud department.

If a vendor would like to challenge a chargeback all documentation must be sent to 2Checkout.com’s Dispute Department for review. If 2Checkout.com decides there is a solid case to present to the credit card provider, the vendor will have the option to challenge that chargeback. The credit card provider charges a fee for challenging a dispute; this fee is passed on to the vendor and is non refundable. The fee to challenge a dispute is $15.00 USD.

The amount of disputes you experience will vary according to the type of products you sell. Products that will experience a higher degree of chargebacks are intangible and products that appeal to children, teenagers, and single adults. Products that will experience a lower amount of chargebacks are tangible products and products purchased primarily by professionals and families.