Friendly Fraud Chargebacks

How can we help merchants that encounter friendly fraud chargebacks?

This is when the cardholder misuses the chargeback process– either intentionally or unintentionally.
If the cardholder is misusing the chargeback process unintentionally, it is probably because they don’t recognize the charge.  Here is how we can help:
The billing descriptor is what appears on the cardholder’s statement.  The merchant should ensure that the descriptor used is easy to understand and accurately reflects the business where the charges occurred.  Ideally, the merchant’s phone number should be included in the descriptor with 24/7 customer service available, if possible.  The descriptor helps eliminate friendly fraud where the cardholder simply doesn’t recognize the charges. 

Merchants can also take advantage of Ethoca’s free logo program.  Through the program, merchant brand marks/logos will be linked to corresponding transactions in the digital banking applications of participating card issuers.
Now let’s work on fighting the chargebacks that happen with intentional misuse from a cardholder:

The better merchants can be about setting expectations and service levels with their customers before the sale takes place, the better.  If a customer charges a purchase back because they missed the return window, the merchant should be able to win that chargeback provided they submit sufficient evidence. 

Most cardholders have immediate access to their statements and pending charges on their account.  The dispute initiation process is easier than ever and, often, can be completed without even picking up the phone.  Merchants should keep that in mind and attempt to make their customer service experience every bit as available to their customers.  If it’s a frustrating experience to get in touch with customer service to resolve an issue, many cardholders will default to using the dispute/chargeback process.

Many friendly fraudsters are repeat offenders–if they file one illegitimate chargeback, they will likely file another. By blacklisting offending customers, you can prevent them from making future purchases as well as the chargebacks that are likely to follow.

If friendly fraud chargebacks are happening, you’ll want to first understand more about why they’re happening.  You can use analytics to narrow them down to a specific product, service, marketing promotion, issuer BIN, geographical area, etc. Check out In-Depth Analytics and Reporting from Midigator to help with this task.

Implement 3DS
EMV 3-D Secure 2.0 is a security protocol that allows issuers to authenticate online consumers.  Providers of this service, like PAAY, can provide fraud liability protection for certain reason codes.  See this post for more detail.


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