Chargebacks can be a nightmare for any eCommerce business. They can wreak havoc on cash flow and profitability. You should avoid them and learn how to fight eCommerce fraud. Recent data from companies shows that chargebacks are becoming more prevalent than ever. The numbers are up, too, in both value and attacks. Learn what to look for and how to prevent them.
Mismatched Shipping and Billing Addresses
Although mismatched shipping and billing addresses indicate fraud, there are legitimate reasons for these mismatches. For example, a person’s billing and shipping addresses may differ, but a simple distance calculation will tell if the two addresses are the same. Likewise, a computer that generates the same order can be in two cities. So, an IP address will help you determine whether the address is a fraudster or legitimate.
Merchants flag mismatched shipping and billing addresses as an indicator of fraud. When shipping and billing addresses differ, the merchant is more likely to experience higher rates of fraudulent orders. The order velocity is likely high if an IP address has been used to make several fraudulent orders from the same account. Merchants can reduce the frequency of fraudulent orders by flagging these transactions. Fraudsters often test the card and ship items to a single customer to make it less noticeable to the user.
Some other common signs of fraud include CNP fraud and orders placed using two different payment cards from the same IP address. Again, this can be normal, but multiple orders simultaneously are suspicious. Additionally, suppose a customer places an order using multiple payment cards. In that case, they may be “card tested” by a fraudster, increasing the chances that their credit card is not fully accessible. Therefore, the same applies to a person who simultaneously orders multiple products from the same store.
Phishing is a Fraudulent Activity in e-commerce.
Despite efforts to protect online shoppers from scams, there are still ways to prevent phishing. Phishing, or “phishing email,” is stealing personal information online. The bad actors infected with the stolen information then purchase online using this information. Once the transaction is completed, the attacker contacts the shipping company to make the purchase and ships the counterfeit product. As a result, the seller loses inventory and chargebacks and is out of business.
Fraudsters target online stores and websites to get the personal information of first-time shoppers. They aim to steal sensitive information from the victims and leave no trace of fraud. Hence, online stores should closely monitor first-time buyers. Also, check payment transactions made with secure methods using close IP and billing addresses. If a transaction appears suspicious, it should be taken more seriously, for example, if it includes a remote country address or multiple shipping addresses.
Customers may create accounts with most eCommerce stores. Personal information and purchasing history are stored in these accounts. Through phishing emails, customers are tricked into revealing personal information, including passwords. After gaining access to their accounts, the fraudster can use their personal information to make purchases. Once in the account, the fraudster can change the passwords and withdraw funds. It is a form of account takeover, and the eCommerce store cannot prevent this fraud. Chargebacks and refunds are just two of the risks associated with phishing.
Merchants must prove a customer is the owner of the card.
To avoid a chargeback, merchants must verify the cardholder’s identity before accepting credit card payments. To do this, they should include the card security value on the authorization form. However, some card issuers only support it and automatically lose their chargeback rights if a card is present during the purchase. Other credit card companies may accept CID if the merchant provides contact information, including an email address.
When accepting credit card payments online, merchants must ensure that the person presenting the credit card is the owner. The merchant cannot process the purchase if the cardholder refuses to show their ID. However, the merchant may request a photo ID to verify the card’s owner. Even though a merchant can’t refuse to accept a credit card without an ID, it’s still important to insist on a photo ID. Without an ID, a credit card is only legal if the cardholder has signed the back.
The chargeback process can be complicated for merchants, involving multiple parties and many moving parts. Many chargebacks are disputed weeks or months after the transaction was completed. First, the cardholder contacts their bank to request a refund. If the dispute is valid, the merchant has the right to dispute it; rather, it must prove the ownership of the card. Ultimately, merchants can fight a chargeback by providing sale verification.
Conclusion
Chargebacks present a significant threat to eCommerce businesses. As online shopping continues to grow, fraudsters are getting more sophisticated in their efforts to exploit merchants and cardholders. Signs of potential fraud, like mismatches between shipping and billing info, duplicate orders, and first-time purchasers should all raise red flags.
Merchants need to be vigilant in verifying identities and ensuring orders are legitimate. Implementing address verification checks, tracking order velocity by IP, requiring IDs, and closely screening activity on new customer accounts are some best practices. While chargebacks sometimes happen despite best efforts, thorough identity verification and order screening can reduce their frequency.
When chargebacks do occur, merchants must act quickly to dispute invalid cases with evidence that proper protocols were followed. Maintaining detailed records of order and identification verification is key to successfully fighting illegitimate chargeback attempts. By understanding common fraud techniques, monitoring transactions closely, confirming identities, and keeping documentation, eCommerce businesses can minimize revenue lost to reversed charges. Chargeback prevention and dispute readiness are essential components of a profitable online sales strategy.
