Combating Fraud and Chargebacks

[mandy]

Think combating fraud is not of paramount concern to online merchants? The topic was front and center at the Merchant Risk Council's annual conference held in early March. Online merchants gathered there were eager to get a deeper level of understanding of how better to combat fraud -- fraudulent chargebacks chief among their worries.

For purposes of this article, we define fraud in the context of a fraudulent chargeback, which occurs when a credit card transaction is refuted by the cardholder. Chargebacks can be classified into three major categories, the first two of which are fraud-related: "True" or "third-party" fraud are most often seen with stolen credit cards. "Friendly" fraud occurs when the actual cardholder makes the transaction and then decides to refute the transaction after the fact. While there are times the chargeback is absolutely valid, there are, in fact, many occasions when the cardholder is intentionally defrauding the merchant in question...

full article: http://ecommercetimes.com/story/Fraud-Ch...62173.html

[Kristijntje]

A related article:

Across the board, the cost of managing fraud exceeds the cost of fraud itself by as much as 300 percent, according to preCharge's report. However, that's a far cry from the millions it could cost merchants who've suffered a data breach, according to Darwin Professional Underwriters, an insurance and risk management consulting firm. Its online Data Loss Cost Calculator calculates possible attorney fees, customer notification costs, fines, and the cost of paying for credit monitoring for every one of those customers. The calculator can compute databases such as the 11,500 breached records at JohnnysSeed.com. In that case, it found $1.9 million in potential costs to combat it the breach.

Meanwhile, the cost of mistakenly rejected orders adds up as well: "Those could be good orders you're throwing away, especially with the dollar the way it is," says preCharge's Director of Client Services, Howard Schecter. "As the dollar goes down and the Euro goes up in value...we have merchants who are doing hundreds of legitimate orders internationally now because it will cost a U.K. shopper less in pounds to buy a camera from a U.S. company than buying it where they are." Incidentally, preCharge guarantees payment to merchants on all sales processed through its secure, Internet-fraud-fighting system.

Though 63 percent of merchants surveyed by preCharge have sold outside the U.S., fewer than 15 percent actively sell internationally; more than 85 percent said they'd actively sell internationally if fraud could be managed properly...

full article: http://www.practicalecommerce.com/articl...e-Problem/

[amy]

Chargebacks can be classified into three major categories, the first two of which are fraud-related: ..."Friendly" fraud occurs when the actual cardholder makes the transaction and then decides to refute the transaction after the fact

The best way to fight a scamming buyer who tries to get a product for free by filing a fraudulent chargeback is to file a police report, and if the order was placed from/or delivered to the buyer's office file a BBB complaint against their employer...I did both on Friday    A buyer bought a new $470 cell phone last month and after receiving it filed a  chargeback claiming the phone was broken (it wasn't).  They didn't contact us about any problems prior to filing the chargeback (we offer a 30-day return policy) and they made no effort to return the product.  After my card processor notified me of the chargeback I immediately filed a theft of merchandise police report with the buyer's local PD.  A police detective contacted the buyer Friday afternoon at his office  and this morning I received a call from the buyer offering to return the phone he tried to scam me out of.  As I type, the phone is on its way back to NY.  I love a happy ending.