July 8, 2014

‘Tis the Season for Fraud Prevention

Posted by 2Checkout Category IconConversions & UX Category IconInternational

The last two months of the year are full of holidays around the world, many of which spur increased buying behavior from consumers worldwide. While the holiday season may be a major revenue generator for merchants, it also tends to cause an increase in the number of fraud cases merchants must deal with. In fact, November sees more fraud involving card not present transactions than any other month of the year—the top 10 days for card not present fraud all fall in the month of November, according to The Paypers.

Fraud Comes in Different Packages

There are several types of fraud merchants may encounter this holiday season including:

Accidental fraud

Accidental fraud, or friendly fraud, is when customers initiate chargebacks or refunds due to a mistake on the customers’ part. This can range from forgetting they have made a purchase to not recognizing a company’s name on their card statement. Either way, these customers attempt to get their money back even though they have made a legitimate purchase from the merchant in question.

For example, if a customer purchases a subscription from Merchant X that bills on a quarterly basis and forgets about the purchase by the second quarterly billing, the customer could potentially initiate a chargeback against the merchant.

Deliberate fraud

Deliberate fraud is much more sinister; in these cases, customers are intentionally trying to game the system by finding ways to receive a good or product without paying for it. These customers may say they didn’t receive their package, the good or service wasn’t as expected in terms of quality or delivery time, or one of numerous other reasons that may spur a refund or win a chargeback.

An example of deliberate fraud is when a customer purchases a pair of shoes from Merchant X, receives them, and then files a chargeback claiming the package was never delivered.

Protect Yourself

So, how can merchants protect themselves from the abundance of fraud waiting to hit their businesses this holiday season? Follow these tips to keep the fraudsters at bay:

  • Maintain excellent records for each transaction. Keep a detailed log of all conversations, tracking numbers, delivery confirmations, and other documents that could potentially help you in case of a chargeback.
  • Notify your customers of any potential delays in delivery immediately. This will help set proper expectations and reduce the number of customers who request a refund due to late receipt of their item(s).
  • Use a recognizable billing descriptor. This is what shows up on your customers’ debit and credit card statements; it’s best to use your company name.
  • Send an email to notify subscription customers that their charge is coming up soon. This notification will remind customers of their prior purchase and reduce the number of confused customers at billing time.

Dealing with A Lump of Coal

Even the most well-prepared merchants are likely to get a chargeback or two during the busiest time of the year for ecommerce sites. However, you do have options—particularly if you’ve kept excellent records of each transaction. Contact us immediately at sellersupport@2co.com immediately after a chargeback notification for help in disputing chargebacks.

Want to learn more?

For more information about chargebacks, check out this Knowledge Base article.