5 Tips For Beating Chargeback Fraud (a.k.a. Friendly Fraud)

There’s no greater feeling of excitement than seeing your sales skyrocket. If you just launched a disruptive new product or a clever ad campaign, seeing the fruits of your labour sprouting on your dashboard is one of the most rewarding parts of working in business.

But sometimes disappointment can shortly follow, when it becomes clear that you’ve been hit by chargeback fraud.

Chargeback fraud refers to the case in which customers sign up for your product and pay for it, but then call their bank or credit card company to dispute the charge. Often they claim that they asked for a refund and it never came, or the product they ordered was never delivered. Sometimes they’ll claim that they never signed up for your product at all, and have never even heard of your company.

This type of fraud is also known as friendly fraud, because the claims made by the customer seem earnest and believable. But this fraud is anything but friendly. If it was happening in a brick-and-mortar store, it would be considered theft.

Chargeback fraud can be a real nuisance to merchants, because not only does it result in lost revenue and a lower credit score, it can sometimes put your payment processing agreement itself in jeopardy.

But to help you learn how to reduce chargebacks, I wanted to share five easy-to-implement tips for fighting chargeback fraud. Even if you don’t manage to eliminate fraud altogether, these ways to reduce chargebacks will put you in better control of your transactions and help to make those sales more profitable.

1. Ensure that credit card descriptors are easy for customers to identify.

If customers don’t recognize the charge on their bank statement, they’re more likely to dispute the payment. Make sure your business or website name is included in the credit card descriptor so that the customer cannot reasonably claim that they didn’t choose to do business with you.

2. Blacklist all customers who file chargebacks.

Fool me once, shame on you. Fool me twice, shame on me. It seems like a no-brainer, but by blacklisting people who lodged disputes, they’ll be unable to do it again. If a customer defrauded you once, it’s extremely unlikely that you’ll ever want to do business with them again in the future – so it’s best to just drop the hammer.

3. Deal with customer support issues promptly and effectively.

Aside from the value that comes with providing a great service to your clients, being quick and responsive with customer support can greatly reduce the prevalence of fraud. Automating what you can makes it easier to cover this base well. Good customer support can not only deter customers from disputing charges with their bank, but it can actually encourage them to write good reviews about your company even if your product wasn’t a good fit for them.

4. Keep good records.

Always keep accurate data about all of your transactions, including customers’ credit card transaction dates, authorization information and amounts. Not only will this give you valuable data for analyzing fraud patterns, but you also might need it in case you need to fight a chargeback. Records like these can help you to win a dispute against a customer who is trying to take advantage of the system.

5. Learn to sniff out fraud before it becomes a problem.

As they say, the prevention is better than the cure. And the longer you’re in business, the easier it becomes to spot fraud before it becomes a killer. Ideally, you should have an analyst whose job it is to identify fraud patterns in the data. If you’re keeping good records like I mentioned in the above point, you’ll have plenty of data to draw upon in your battle against fraud. Sometimes factors such as the credit card security code being incorrect, or the billing and shipping addresses not matching, can be a giveaway.

So don’t let chargeback fraud get you down.

Press ahead with your campaigns and do what you know is right. As long as you’re transparent, authentic and provide good service, fraudsters will have no legitimate reason to dispute charges.

And if they do, you just have to ensure that you’re doing all you can to collect data and identify patterns that will help you to finally get chargebacks trending down.