Chargebacks are gradually becoming a major issue for a high number of online merchants. While some chargebacks are unavoidable and actually arise from the merchant’s negligence, many of them have to do with credit card fraud, misused credit cards, and even fraudulent schemes to get the ordered products for free.
As more and more business owners opt to prevent and minimize financial losses from chargebacks by using the Visa VMPI service solution, we would like to discuss other ways of detecting fraudulent orders and avoiding chargebacks altogether.
What Kinds of Chargebacks Are There?
It is important to realize that not all chargebacks are inherently fraudulent. Sometimes businesses accidentally ship a product that is different from the one ordered, or fail to notice a quality issue with the product. Once the customer receives a defective item or an item that they didn’t order, they naturally want to get their money back and request chargeback on that transaction. Fortunately, it is totally up to merchant to reduce the number of these chargebacks by setting high operating standards for their business.
Actual fraud is another reason why you, as a business owner, may have to deal with chargebacks. Most unauthorized uses of a credit card are eventually noticed by the legitimate owner, who then files a chargeback with their bank.
Finally, the last kind of chargeback is the one that is potentially the most damaging to your online business. Commonly referred to as “friendly fraud”, this fraudulent scheme is fairly simple. The legitimate owner of the credit card purchases a product, receives it, and then files a chargeback to get their money back and effectively get the product for free.
There are some tips and guidelines that can help you identify a potentially fraudulent order and take the right steps towards dealing with it. You can find out more about them in the section below.
How Can I Detect Fraudulent Chargebacks?
Beyond relying on services like the aforementioned VMPI, there are also some things you can do to identify fraudulent chargebacks on your own. Here is a checklist of the most important factors to watch out for:
Obviously fake email addresses or phone numbers in the order details
Unusually high amounts of a product for a single order
Inconsistent customer information across multiple orders
Mismatches between the customer’s IP address origin and the shipping location
Several failed transactions in a row for one order
If you notice at least one of these warning signs, it is a good idea to try and contact the customer directly to verify their identity and make sure they actually placed the suspicious order. It is always better to be overly cautious, than to become a victim of fraud. Unfortunately, if you run a large online business, you’ll be unable to spot all the scammers; thus, it is inevitable that you’ll suffer some losses as a result.
Business Owners Are Stronger Together
If you have successfully identified a chargeback fraudster, don’t hesitate to report them through a dedicated platform to give other merchants a warning. You can also share your experiences with other readers in the comments section below!
