Avoiding Chargeback Fraud

Ellen C. Wells

If you operate an online store, keep an eye out for chargeback fraud. Wait, what’s a fraudulent chargeback? It’s when a customer pays for something with a credit card and then requests a chargeback—or a return of funds—from the issuing bank even though she or he has received the goods. Not good! It’s a crime that’s reportedly increasing by 41% year-over-year.

How can your small business avoid chargebacks? The website Small Business Trends gathered 10 tips on what to watch for and how to take action.

• Card Not Present (CNP) merchants should implement an end-to-end fraud and chargeback management system to protect payments and get included in the dispute early on

• Deploy a layered fraud prevention suite to detect anomalies in the sales process

• Watch for unusually large orders

• Watch for multiple orders from the same IP address, but using different card numbers

• Watch for transactions that try to overcharge the card for more than the transaction amount

• Don’t rely on the bank to notify you of a chargeback—be vigilant with checking

• Use a mitigation system that includes the merchant in the dispute early in the process

• Keep your billing descriptors (i.e. the merchant name alongside the transaction on the bill) accurate

• Look for transaction attempts from IP addresses in high-risk countrie, such as Russia, Malaysia and Ghana

• Look for fake phone numbers, email addresses, etc. when orders are placed GP