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Preventing Card-Not-Present Chargebacks

card not present

Best Ways to Prevent Card-Not-Present Chargebacks

While the eCommerce surge introduces great earning potential for businesses, it has also lead to problematic financial conditions.

The number of card-not-present chargebacks is increasing just as quickly as card-not-present transactions.

Increased Transactions Mean Increased Chargebacks

There are several reasons why the number of card-not-present chargebacks has increased dramatically over the last several years:

  • The more transactions processed, the higher the chance for disgruntled and dissatisfied customers.
  • Fraud detection and prevention technologies can’t keep pace with the eCommerce growth.
  • The introduction of EMV cards will shift fraud from the secure card-present setting to the less protected, effortless card-not-present environment.
  • Customers looking for instant gratification and a no-hassle return process have caused friendly fraud to flourish.
  • The impersonal online shopping experience decreases customer loyalty.
  • The payment industry created chargeback regulations in the pre-internet era, meaning imbalances have emerged due to modern processing techniques.

Until networks, banks, merchants, and consumers all unify to stem the flow of chargebacks, merchants will continue to carry the burden of chargeback prevention.

Preventing the Three Causes of Card-Not-Present Chargebacks

First and foremost, we encourage merchants to download our free chargeback prevention eBook. This resource contains 35 detailed suggestions for enhancing a DIY chargeback prevention strategy.

35 Simple Steps to Preventing More Chargebacks

Download our FREE guide that outlines 35 step-by-step effective chargeback prevention techniques. Learn insider secrets that will reduce your risk of chargebacks, increase your profits and ensure your business's longevity.

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There are only three reasons cardholders file chargebacks: criminal fraud, merchant error, and friendly fraud. Addressing each cause individually can reduce the risk of chargebacks. Here is how:

1. Reduce Criminal Fraud

criminal_fraud_chargebacksCriminals commit fraud when they obtain stolen credit card information and make unauthorized transactions.
  • Validate the shopper’s identity. There are various indicators of fraud; keep an eye out for suspicious transactions and validate the orders before completing them.
  • Use the card networks’ fraud detection tools:
    • 3D Secure, Mastercard Secure Code, and Verified by Visa are automated fraud detection programs that help ensure the cardholder is actually participating in the purchase. An additional pop-up window asks the shopper to enter a predetermined personal identification number. If the shopper can’t provide it, the transaction is terminated.
    • Card Security Codes: Each network has its own name for the card security codes printed on the cards, but they all serve the same function. Because card security codes are printed on the card and not stored elsewhere, the card would need to be physically present for the shopper to make the purchase.
    • Address Verification Service: AVS is an automated tool that compares the billing address listed in the checkout process against the billing address used by the issuing bank. A disparity could indicate fraud.
  • Check for affiliate fraud by investing in an affiliate fraud detection service, like the one offered at Chargebacks911®, to terminate false consumer transactions and prevent the resulting chargebacks.
  • Use fraud filters to detect potential criminal activity, rank the likelihood of fraud, and determine the risk factor associated with the transaction. Fraud filters are most commonly used in conjunction with chargeback insurance.
  • Sign up for chargeback alerts. Alert systems notify the merchant when a customer initiates a transaction dispute based on criminal activity. The merchant is alerted to the customer’s claim, allowing the merchant to offer a refund instead of sustaining a chargeback. Chargebacks911 provides the broadest global coverage.

2. Reduce Merchant Error

merchant_error_chargebacksAnother common cause of chargebacks is merchant error. Seemingly insignificant errors and oversights in business practices can cause substantial revenue loss.

  • Check processing procedures. Always obtain authorization, submit transactions for clearing in a timely fashion, and only process a transaction once.
  • Use Dynamic Currency Conversion properly. Ensure customers understand the functionality and voluntarily opt-in to the service.
  • Review the business’s return and cancellation policy. Ensure it is easy to locate and understand. Ask the customer to accept the policy before processing the transaction.
  • Ensure the billing descriptor is easy to understand and contains business contact information (either a phone number or email address). Customers can file a chargeback if they don’t remember making the purchase.
  • Ship the product before charging the card.
  • Provide detailed information about the shipping process. Make sure the customer understands when the item will be shipped and when it should arrive.
  • Write accurate, concise product descriptions, and provide detailed images.
  • Promptly cancel services and issue refunds.

3. Reduce Friendly Fraud

friendly_fraud_chargebacksFriendly fraud is sometimes referred to as chargeback fraud because consumers illegitimately use the chargeback process to secure a refund. Instead of contacting the merchant for a refund, a cardholder will exploit gaps in chargeback regulations and void the transaction with the bank. Here's how to fight it:

  • Improve customer service. Cardholders are more likely to secure a traditional refund instead of a chargeback if dealing with the merchant is just as frictionless as contacting the bank. Answer the phone, reply to emails, and offer 24/7 support.
  • Write customer-friendly policies. Consider a “no questions asked” return policy. Make recurring payment cancellations “no strings attached.”
  • Manage recurring payments. Communicate rate changes, never charge the customer early, and send reminders before charging the card.
  • Use delivery confirmation to prevent “merchandise not delivered” chargebacks.
  • Implement additional security measures for digital goods.

Get Professional Help

Only a small percentage of chargebacks are preventable with standard, DIY techniques executed by an in-house chargeback analyst. To ensure maximum profitability and protect the longevity of your merchant account, you might need professional help.

Chargebacks911 offers turnkey services that are fully customized for your business. Whether you need a little help or a lot, Chargebacks911 can assist your business with any chargeback management concerns. Contact us today. We’ll provide a free ROI analysis, calculating how much more you’ll earn by successfully preventing and disputing chargebacks.


Prevent Chargebacks.

Fight Fraud.

Recover Revenue.

Image sources:

2014 LexisNexis® Risk Solutions True Cost of Fraud Study, Visa Core Rules and Visa Product and Service Rules, and PaymentsSource.com.