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Retail Fraud: Prevent Chargebacks
eCommerce merchants are perhaps the most vulnerable to fraud chargebacks because they process payments where the Card is Not Present (CNP). Chargeback code 61 relates to fraudulent CNP transactions, and occurs when the cardholder reports that they have not authorised the transaction. This can happen because the card has been stolen, cloned or because of identity theft or account takeover. These can also be the most damaging to reputation, as the genuine cardholder may view you as partly responsible for not preventing the fraud.
Obtaining a card authorisation code does not necessarily protect you from fraud chargebacks such as code 61; however there are a number of steps you can take to prevent chargebacks caused by fraudulent activity:
- Carry out an identity verification check on your customer; check that they are registered or active at the address they have given you; a fraudster may have a stolen card but not know the address or other personal information of the real cardholder.
- Check against other data sources; fraudsters will use any tactic they can to obtain gods and services. A quick check against the mortality database could save you thousands.
- Use IP Geolocation; IP identification can determine where the customer is ordering from, their registered address, and the delivery address. You can then set business rules to accept or reject the distance triangulation. For example, would you allow someone in Leeds to order goods to be delivered to an address in a high risk country such as Nigeria? With IP Geolocation you can make an informed decision, and this information can be particularly useful for those merchants who ship to third party/gift recipient addresses.
What else can be done to prevent chargebacks?
Unfortunately fraudsters using stolen identities and credit card information will move from site to site using the compromised card details until eventually it is reported and the card issuer places a block on the card.
By taking part in data sharing you can search against data that is known to be compromised and prevent your site from being hit by fraud.
Fraud-ID is 192’s flagship data sharing scheme, where retailers can share not only chargebacks received, but those transactions they suspect are fraudulent. This data combined with identity verification as point of sale is highly successful at preventing chargebacks and their resulting cost. To find out more about Fraud-ID, you can view our online demo here, or contact us for details on how to join.
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