The behavior of cardholders during the COVID-19 crisis is setting up merchants to receive an increased number of disputes in the coming weeks and months. The combination of ecommerce purchases, high purchase volumes as cardholders expect more weeks of quarantine, and the possible cut back in spending due to job loss or economic fear creates the perfect situation for fraud to emerge. These guidelines will help make sure your company retains your hard-earned revenue by preventing and responding to disputes.
Preventing True Fraud
The current climate creates a perfect place for fraudsters to take advantage of cardholders. The FFC noted that phone scammers have seized the opportunity to prey on consumers. They also reported cardholders receiving scam text message campaigns and robocalls. When these fraudsters get a hold of credit card credentials is when true fraud starts to affect merchants.
Revenue lost to true fraud can't be recovered, so you need to prevent it from happening in the first place. Third-party fraud prevention solutions are very effective at blocking overtly fraudulent transactions and flagging suspicious transactions for manual review.
No matter which third-party fraud prevention solution provider(s) you choose, you need to ensure that AVS and CVV, CVV2, or CVC are being collected. In addition, transactions should be monitored for fraud in order to identify red flags that trigger manual order reviews.
Look Out for Fraud Red Flags
Fraudulent transactions might pass through AVS and CVV/CVV2, but still, trigger red flags that warrant further investigation by your company. When one of these red flags is raised, manually review the transaction and contact the customer placing the order to verify their identity:
- Bulk orders
- Large-ticket transactions
- Multiple orders in a short time period
- Billing address differs from shipping
- Rush or overnight delivery requests
- Multiple order attempts with varying inputs
- Multiple orders made using different cards, but same shipping
- International shipping where AVS is not applicable
Preventing Legitimate Disputes
The other type of dispute that doesn't represent recoverable revenue are legitimate disputes.
Usually, a common cause of legitimate disputes is when a customer feels the product or service provided was of low quality or simply doesn't function as promised. Merchants who offer subpar merchandise can expect a slew of disputes from unhappy customers.
Right now, it is even more important to communicate with your customers if something is going to be different from 'business as usual' such as longer than normal fulfillment or shipping times. Without communication during this time, you can decrease the customer's experience and end up with a dispute.
Here's how you can prevent legitimate disputes from occurring:
Create Robust and Accurate Product Descriptions
Another common cause of disputes is when the product or service provided to the customer does not match the description given by the merchant at the time of purchase. Product description copy, imagery, and specifications must be accurate and complete. Ask yourself the following questions about your current product descriptions:
- Does the description copy and imagery accurately represent the physical product?
- Can customers zoom in to see detail?
- Does the lighting distort the actual color of the product?
- Are you giving all the necessary quantitative measurements?
Cultivate Extensive Product Reviews
Alongside robust product descriptions, cultivating and displaying product reviews on product pages is incredibly helpful to safeguard against customer disputes where the customer feels the product was not as described. Not only do customer reviews help you fine-tune product descriptions, but they're nearly a necessity from a customer perspective.
Always ship your items as soon as possible. In the current turbulent times, if cardholders do not receive the product when expected, they may think the merchants never shipped the product, or the order was back-ordered. Make sure that your processing and shipping periods are clearly defined every step of the way and don't hobble yourself with unrealistic shipping expectations.
Keep in mind that cardholders have a valid reason to dispute a charge if they do not receive merchandise by the expected date.
When something does go wrong with the order fulfillment process, always keep your customers informed. If the item is out of stock or you're having trouble with a distributor, send out an email or make a phone call. Let your customer know roughly when you expect to have the product in hand and what you're prepared to do should the shortage become permanent.
Agreement of Clearly Stated Terms & Conditions
Having your customers click on a terms and conditions button, instead of just posting them on your website, can guarantee that a user acknowledges and has read the terms. Agreement to terms is a fundamental safeguard against chargebacks. Providing a checkbox guarantees that the purchaser agrees to the terms and conditions.
Prevent Duplicate Transactions
If you accidentally process a single transaction more than once, you're going to see 'duplicate transaction' chargebacks. Make sure your procedures double-check transaction processing accuracy. It's also essential to prevent and watch for customers who accidentally initiate multiple transactions by hitting the checkout button repeatedly.
Preventing Friendly Fraud
Friendly fraud occurs when a cardholder makes a mistake and disputes a valid purchase.
There is no malicious intent, just simple forgetfulness or a family member making a purchase. During this time of kids being at home, working from home, quarantine, and other abnormal situations can cause cardholders to make purchases they usually wouldn't. When looking over their statements in the following weeks, it can be harder for cardholders to recall what was purchased and why.
The good news is chargebacks that occur because of friendly fraud represent recoverable revenue. Still, it's critical to make an effort to prevent instances of friendly fraud in the first place.
You can help prevent friendly fraud by:
Optimize Your Merchant Descriptor
Poor merchant descriptors will lead to disputes. If the customer doesn't recognize a transaction, there's no reason for them not to dispute it. There are several best practices regarding merchant descriptors that your business should keep in mind. The most basic is displaying a recognizable company name and always including relevant contact information.
Ensure Contact Information is Easy to Find
As suggested in optimizing your merchant descriptor, your contact information must be easy for customers to locate. Your phone number, support emails, and contact forms should be accessible from your website's home page. Whether it's in the footer or, better yet, in the main navigation, it should be easier for a customer to contact you than it is to contact their issuing bank.
Preventing and Revealing Chargeback Fraud
Chargeback fraud happens when a cardholder knowingly disputes a valid purchase. Consumers during this time may have to cut back on spending due to job losses or economic fears. Because of this, merchants may see a spike in chargeback fraud disputes as cardholders try to get their money back while still retaining the product or service.
The only way to reveal chargeback fraud is through the collection of comprehensive chargeback data, which is then submitted as a bulletproof chargeback response. In order to prevent and reveal chargeback fraud, your business needs the following:
Offer a Customer-Centric Return Policy
Strict return policies often lead to unsatisfied customers, who then resort to filing disputes when a refund is denied. Your return policy should make it easy for customers to get their money back or exchange a product. By tracking and analyzing your return data, you can identify patterns and make adjustments to prevent similar returns from occurring in the future.
Documented Customer Service Communications
Any feedback you get from the customer helps you establish the identity of the individual placing an order, and potentially of their acceptance of a product. Proactively reach out to customers to establish identity; be sure to save any emails, call recordings, chat transcriptions, etc. that occur.
Proof of Shipment
It's critical to gather tracking and shipping information from a reputable shipping company to serve as proof of shipment. We recommend that you always opt for shipping that includes tracking and delivery information. While shipping carriers without these features are less expensive, consider the cost of the chargebacks that inevitably follow.
Record User History for Services Rendered
If you provide services, whether in-person or online, be sure to record user logs, session activity, logins, and relevant support emails. Doing so allows you to display that the cardholder utilized the services for which they paid.
Preparing for Your Ongoing Success
Now that you know the best practices that we've learned from over a decade in dispute resolution, you're ready to put a holistic approach to fraud in place.
As long as your business accepts payment cards, fraud is going to be a challenge. Right now, more than ever is the best time to take proactive steps to prevent disputes and stop fraud loss.
By implementing the right front-end fraud solutions and continually optimizing the dispute resolution process, your company will be in the best position to retain hard-earned revenue.