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International Chargebacks

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Preventing Chargebacks Resulting from International Orders

The internet is a great tool for connecting buyers and sellers from around the world; however, that degree of global connection comes with greater risk of fraud.

When going global via the internet, all businesses should be aware of the harm that international chargebacks can do to their bottom line.

A Difficult Choice for Merchants

Businesses that open themselves up to international clientele reach a much broader market than businesses which remain strictly domestic. At the same time, opening up to international markets leaves merchants vulnerable to international chargebacks.

What's the difference between international and domestic chargebacks? For starters, orders placed overseas with U.S. merchants are as much as three times more likely to be fraudulent than domestic orders.

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This leaves merchants with a difficult choice: accept only domestic orders and give up the potential profit from international customers, or take international orders and accept the elevated risk of chargebacks.

Fortunately, there are ways in which merchants can bring their business to the international market while still keeping their risk fairly minimal.

Be Wary of High-Risk Destinations

There are certain countries that are notorious for placing more fraudulent purchases than others. A 2015 report identified the top 5 countries for ecommerce fraud.

Nation % of Transactions Considered Fraudulent
Indonesia 35%
Venezuela 33%
South Africa 25%
Brazil 11%
Romania 10%

In contrast, the same report found Scandinavia, Switzerland and New Zealand to be the safest destinations in the world for U.S. e-retailers.

In order to protect themselves, merchants should approach orders from countries and regions known for high instances of fraud with skepticism. While merchants may still accept orders from the above-mentioned countries, they should do so with great caution.

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International Chargeback Prevention Tip #1: Analyze IP Addresses

It’s important to keep in mind that an order’s shipping address and the actual country of origin are not necessarily the same. By using IP addresses as an identifier, merchants can sort out suspicious and potentially fraudulent transactions.

If the geographic location for the IP address doesn’t match with the card billing address, set the order aside for manual review. If there is a mismatch and the IP address is in a high-risk country, the chance for fraud is greater.

For many merchants, accepting orders from countries like Indonesia and South Africa simply represents too great a risk. These merchants may prefer to simply block IP addresses associated with high-risk nations, thus making it impossible to view the site from those countries.

Read more: 6 Tips for Banning Known Fraudsters and Preventing Chargebacks

International Chargeback Prevention Tip #2: Only Conduct Special Orders with Trusted Customers

Carry out special orders with caution. Special orders involving customized merchandise are highly susceptible to chargebacks, as even the slightest variance from the customer’s ideal specifications can lead to dissatisfaction.

Even if the customer is satisfied with the product, they could still allege that the job was botched and demand a chargeback. This is an example of what is known as friendly fraud—a seemingly legitimate order for which a cardholder demands a chargeback in order to defraud the merchant.

Friendly fraud is especially damaging, as the merchant loses the profit from the sale, the merchandise already shipped, and is responsible for paying the associated fees and penalties.

Read more: Five Surefire Ways to Prevent Chargebacks and Retain Revenue

International Chargeback Prevention Tip #3: Know the Red Flags of Fraud

There are certain behaviors and practices which merchants should recognize as the tell-tale signs of fraud. These include:

  • A customer placing multiple orders in a short time span and shipping to different addresses
  • The email address given seems to be a nondescript jumble of letters and numbers
  • The order was placed late at night, especially between the hours of 2:00-4:00 am.
  • The name and address is written in all lower case letters or contains spelling errors
  • The customer orders multiples of the same item
  • The item(s) ordered are of a high value

Read more: Best Indicators of Fraud for Card-Not-Present Transactions

Prevent International Chargebacks

There is no guarantee that exercising caution plus taking preventative measures will prevent all international chargebacks. However, as the old saying goes, “an ounce of prevention is worth a pound of cure.” Preventing international chargebacks can go a long way when it comes to protecting your business.

For even more tips about creating a comprehensive prevention plan that includes international chargeback protection, contact Chargebacks911. We’ll provide a no-cost, no-obligation review of your current chargeback situation.


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