Executive Profile Series with Our COO Monica Eaton
Monica Eaton was interviewed by the Payments Journal to offer her expert knowledge on chargebacks. Over the years, a chargeback has evolved from being a form of consumer protection to an avenue to facilitate fraud. Eaton explains, that consumers are now using chargebacks to cyber shoplift in the form of friendly fraud.
The effect of illegitimate chargebacks on merchants can be devastating. Not only does the merchant lose the cost of the merchandise and any profit that would have been made, they are also hit with processing fees. As for consumers, they can be added to a blacklist, blocked from making certain purchases on their card and their credit rating can be affected.
Eaton discusses how banks must take more responsibility. Exercising the correct due diligence will help reduce friendly fraud and also save merchants a lot of money. Reason codes need to be looked into more thoroughly and “the customer is always right” approach needs to be reevaluated.
There are a number of changes that need to be made to break the cycle of friendly fraud. Battling the ignorance surrounding this topic should be at the forefront of this fight.
Why are chargebacks filed?
Chargebacks are filed as a remedy to a transaction issue where a cardholder was unjustly charged either as the fault of the merchant or due to criminal intent (i.e. their card number was stolen, etc.)
How are fraudulent chargebacks filed?
Whether the issue is fraudulent or otherwise, the method and process for filing a chargeback remains the same.
What is cyber shoplifting or "friendly fraud"?
This is the result of a chargeback that was filed, under the pretense of a legitimate claim (such as "merchandise was never received" or "stolen credit card"). It is under pretense because the reality is very different. Friendly fraud is a type of fraud committed by consumers who use the chargeback method to essentially get something for free. A consumer may order a pair of shoes, receive those shoes, but later contact her bank and request a chargeback claiming she never received this merchandise. If the bank lacks the resources to do enough due diligence, the consumer may receive an immediate refund based on her claim alone.
