Merchants Explore New Payment Channels to Survive the Pandemic. But What Are the Risks?
Online merchants have long known the importance of providing multiple payment options. The more channels through which customers can give you money means…well…more customers will give you money. This same truth has offered many brick-and-mortar retailers the much-needed tools to survive the COVID-19 pandemic.
Thousands of stores around the world remain shuttered or are operating under limited capacity, as a result of the virus. In response, many brick-and-mortar outlets are adding new shopping and payment options to help stay afloat.
One recent study found that 80% of small- to medium-sized businesses who diversified their payment options due to the virus have seen a positive impact. The researchers also noted that among merchant respondents:
- 88% made some changes to their checkout process during the pandemic.
- 39% reported their business volume increased due to changes made at checkout.
- 64% attribute their recent successes to a greater emphasis on card-not-present sales.
- 23% launched a card-not-present payment option for the first time due to the pandemic.
- 17% of those without an online presence plan to add one soon.
- 44% are adding contactless payment options for delivery.
- 35% have embraced click-and-collect or curbside purchasing options.
New Sales Channels. New Threats.
Grow your business and keep your risk exposure in check. Find out how.
Card-Not-Present Threats Lie Ahead
Giving your customers more payment options is a great idea. However, there could be some unintended consequences, too.
Adding new payment options can mean more fees, higher overhead, and new points of exposure regarding fraud and chargebacks. That last point can be a big shock for many brick-and-mortar sellers who aren’t accustomed to dealing with card-not-present threats.
It’s inherently more difficult to verify your buyer’s identity with a card-not-present purchase because you never have physical possession of the payment card. Fraudsters can use a variety of tactics to take advantage of that fact. They may use stolen cardholder information or take control of a valid user’s entire account (a process appropriately labeled “account takeover”). There’s also friendly fraud, which involves a valid cardholder abusing the chargeback process to claim an unwarranted payment reversal.
Regardless of the cause, the end result is the same: you lose sales revenue, merchandise, and shipping and processing fees. You’ll also get slammed with additional penalties for every chargeback filed against you. Over time, this can result in a higher chargeback ratio, which can put you in jeopardy of losing your card processing privileges altogether.
Solutions for Every Chargeback Source
Introducing remote options like online ordering and click-and-collect will go hand-in-hand with heightened fraud and chargeback risk. This isn’t a new trend; we’ve observed a clear through-line connecting card-not-present sales to chargebacks.
Take the restaurant industry, for instance, The 2018 State of Chargebacks report shows that 28% of merchants in the food and beverage space had a chargeback rate between 0.5 and 1% of transactions. One in ten had a chargeback rate above 1%. Compare that to just five years earlier (before widespread adoption of click-and-collect ordering), when the average industry chargeback rate was just 0.01% of transactions.
So…does that mean you’re better off skipping out on those lucrative online sales? Of course not!
You just need to have a plan in place to manage new risk factors, and that starts with identifying chargebacks by their source.
We can trace all chargebacks to one of three fundamental sources. Each of these demands a unique, tactical solution that addresses the underlying issue:
THE PROBLEM: Minor missteps and miscalculations can often result in big losses. You may be able to prevent between 20-40% of all chargebacks by making slight adjustments to your policies, procedures, and overall customer service strategy.
THE SOLUTION: Chargebacks911® offers a 106-point Error-Risk-Threat (ERT) assessment process aimed at identifying and resolving potential chargeback triggers. We use pinpoint detection to identify practices that can lead to chargebacks, and offer guidance on how to resolve them.
THE PROBLEM: Bad actors operate with impunity in the card-not-present space. Without a multilayer strategy to contend with fraud including address verification, geolocation, velocity checks, and other tools, all backed by dynamic and intelligent fraud scoring, you could make yourself an easy target.
THE SOLUTION: We at Chargebacks911 work alongside many of the leading names in criminal fraud management. Our services fill a complementary role by helping to detect and eliminate pre-transactional threats.
THE PROBLEM: Friendly fraud occurs when cardholders—either intentionally or by mistake—abuse the chargeback process. This could be a simple misunderstanding, or it could be a case of “cyber shoplifting,” with a cardholder trying to get something for free. The best approach is to engage in tactical chargeback representment and to take steps that can reduce mid-to long-term risk.
THE SOLUTION: Chargebacks911 provides the industry’s leading solutions to identify and eliminate friendly fraud. We deploy the skills and expertise necessary to recover your funds and enable long-term friendly fraud reduction.
Guaranteed Revenue Recovery
Against the backdrop of the COVID-19 outbreak, there’s never been a better time to expand into remote payment options. That said, your approach to online ordering and click-and-collect may be the difference between success and failure in a tight marketplace. You need to be ready for what’s ahead…but you don’t have to go it alone.
Chargebacks911 offers award-winning, industry-defining, and fully-managed chargeback service. Best of all, our services are backed by a 100% ROI guarantee, meaning you will save money with Chargebacks911.
Ready to get started? Click below and learn how much you could save today.