Disputed payments are not only costly, but they can also negatively impact your customer relationships. While guarding against fraud and legitimate customer disputes is impossible, effective chargeback prevention strategies can significantly reduce the negative financial impacts.
A chargeback (or payment dispute) occurs when a cardholder contacts their bank to reverse a transaction. Typically, the cardholder is looking to prevent identity fraud and get a refund for unperceived or defective merchandise.
1. Global Networks
When a consumer files a chargeback, it tells the bank something went wrong. It signals that fraud, error, or another issue must be resolved. Merchants and banks must then investigate this claim to determine what happened to prevent the same problem in the future.
A global network spans the globe and includes people, communities, and organizations that crisscross borders. Examples include transnational corporations, terrorist networks, and social movements like feminist groups that transcend the boundaries of nation-states. Technical global networks are also present in telecommunications systems that utilize a range of satellite, cable, and wireless technologies.
Global fraud data network combines machine learning with expert human review to identify dispute patterns and pinpoint specific factors responsible for your chargebacks. They can help you avoid chargeback fraud and preserve your revenue. Notifications inform you about fraud trends, so you can take action before a chargeback is filed.
2. Identity Trust Decisions
More than 40 years ago, chargebacks were created to allow cardholders to correct billing errors and fraud. These protections preserve consumer confidence in credit cards by ensuring merchants don’t lose funds from fraudulent purchases.
Yet, despite their stated purpose, chargebacks also create significant losses for merchants that don’t respond quickly or accurately to them. In addition to losing the product’s value, they often lose revenue from the chargeback dispute win rate, and they can be put on a “high risk” list for future credit card processing.
Fortunately, businesses can stop chargebacks with advanced fraud prevention solutions that make identity trust decisions throughout the customer journey.
These decisions are based on data unavailable to the customer, such as a business’s fraud and trust-related information gathered by their payment processor or other data from an identity verification provider. By using this data with unsupervised and supervised machine learning, companies can make ship-or-don’t-ship decisions in milliseconds customized to their ideal outcomes.
3. Real-Time Linking
Managing a fraud and chargeback dispute is one of the most time-consuming and costly aspects of running an online business. It requires a dedicated team of people or partnering with a Payment Service Provider (PSP) that offers a robust, cutting-edge fraud prevention system and can handle all dispute resolutions and chargebacks for you.
A reliable PSP will help you avoid bogus chargebacks by using fraud and chargeback alerts to identify and refund legitimate transactions before they become disputes. This can reduce chargeback rates and save money on fines your acquirer might levy for violating their thresholds.
Global network analyzes billions of data points to establish real-time links between identity elements, approving high-trust interactions and declining high-risk ones. This enables us to intercept disputes from friendly fraud-related reason codes before they get processed and significantly lower your chargeback rate without impacting customer friction. This is also critical to prevent the spread of fraudsters to other companies, as they will try to exploit any security weaknesses.
With fraudsters increasingly using stolen credentials acquired on the Dark Web, a robust post-authorization chargeback prevention strategy is critical to avoid allowing false charges on the card. Taking an anti-fraud approach, such as user identity trust signals like email addresses, shipping addresses, and device IDs in conjunction with supervised and unsupervised machine learning to make approval decisions, reduces the number of orders subsequently subject to a chargeback.
Chargebacks were initially designed to provide consumers with recourse for cases of fraud and errors, which is a vital consumer protection mechanism. But today, consumers ask for chargebacks over various issues unrelated to fraudulent or legitimately-obtained transactions.
For example, a customer might dispute a transaction they don’t recognize on their statement because it is a travel or hospitality-related purchase that wasn’t expected or wanted. In these scenarios, a merchant will likely be hit with a Visa or MasterCard Misused Authorization Fee or Processing Integrity Fee.