By Melody Lashmar There are many things affecting an online merchant’s ability to stay afloat in the competitive Internet marketplace. A downturn in the economy, business rivals with a similar product on the market and dwindling consumer confidence can all take a toll on your profits. In addition to these factors is the very real threat of e-commerce fraud, one of which is deceptive chargebacks.
One example of a chargeback situation that had devastating consequences is a travel company that recently closed its doors. Several customers who paid for their tickets online by credit card then turned around and contacted their card issuers to initiate a chargeback because they weren’t able to take the trip they paid for. If you think you wouldn’t be held liable for this type of chargeback, think again. If the transaction is charged back for any reason, including fraud, the merchant has to pay for the chargeback. Even if the situation is resolved in the seller’s favor, and they’re able to recoup the cost of the stolen merchandise or services, chargeback fees can add up.
It isn’t just veteran scam artists who are engaging in e-commerce fraud. Hard economic times might cause the average customer to “steal” products from an online retailer by saying he or she never received the product that was ordered. For example, a well-meaning consumer may have made a large online purchase for a flat screen television, but then found himself out of work the next day, so he may claim the television was never received. These types of scenarios can be frustrating for hard-working merchants who are trying to develop a loyal customer base and boost their bottom line.
In the ever-evolving world of online fraud, there are very strict time frames that are imposed on a merchant to contest a chargeback. If the merchant does not reply in the required time period, the chargeback cannot be contested and the merchant has to pay the chargeback regardless of whether a merchant has proof that the merchandise was delivered. This translates to emboldened consumers who make “friendly” chargebacks, believing they have little to risk. In some cases, card issuers are not aggressive in pursuing their customers for fraud.
As a business owner, you need to be proactive about chargeback abuse to stop scam artists in their tracks. One way to be diligent is by analyzing sales records. This can help you identify customers who charge back items on a regular basis and give you the opportunity to decide whether you want to continue doing business with them. Also, there is information available online that helps you determine which zip codes are notorious for online theft, so you can remain on high alert when a buyer asks you to ship to that area.
As summer heats up and people are heading off on vacation, buying graduation gifts and enjoying more leisure time, this season presents more opportunities for your small business to thrive. It also presents more chances for e-commerce scammers to strike.
In the case of chargeback fraud, banks are taking extra steps to ensure consumer safety and loyalty, while the merchant is getting the short end of the stick. These institutions may even encourage their consumers to avoid NSF fees by claiming that certain transactions are unauthorized.
What’s a merchant to do when a buyer makes a purchase and then claims he or she never received it or says he is shipping back a defective product but the merchandise mysteriously gets “lost in the mail”?
The following tips can help you prevent e-commerce fraud and limit the amount of dishonest transactions and chargebacks.
– Verify the customer’s order by sending a confirmation email before the transaction is complete.
– Make sure your company name and phone number is clearly listed on the customer’s credit card statement. Oftentimes, consumers will dispute a charge if they don’t recognize the seller’s company.
– Highlight your company’s contact information and make sure you provide excellent customer service. If you make it as easy as possible for a buyer to contact you should an issue arise, this discourages them from calling their bank to initiate a chargeback dispute.
– It’s been thought that Internet fraud often occurs late at night, so be wary of those purchases that take place in the wee hours of the morning.
– Be suspicious of orders shipped to the same address but using several different credit cards.
– Use an Address Verification Service (AVS) on all online transactions to verify the billing information the customer provides in the order with the information that is on file with the issuing bank.
We live in a society where many people want to get something for nothing. This is especially true in the retail world. Rather than paying for merchandise received, some deceitful consumers would rather “steal” their purchases by either claiming their credit card was stolen and they were charged for items they didn’t order or by stating they never received the item in the mail. Whatever the excuse, this causes an unwanted financial drain on the unsuspecting merchant. Not only do they lose the goods they shipped, but they also lose out on the amount they would have made on the sale.
Digital thieves have gotten creative about the ways they swindle gullible online retailers. In one case of e-commerce fraud, a man purchased merchandise from an Internet merchant and upon checkout, he registered with many different variations of his name and address. The hustler then initiated chargebacks claiming he never received the products. The small business owner grew suspicious and asked the police to launch an investigation. The authorities discovered that the con man was buying and reselling the products he purchased.
Although you may think something like the above scenario can never happen to you, think again. Chargeback-related fraud is on the rise as scam artists grow more sophisticated in their schemes to defraud merchants. The Better Business Bureau (BBB) offers the following tips for fighting friendly fraud:
- • Use a shipping service that tracks delivery. Some shipping firms provide tracking information and signature confirmation. This information can help verify whether or not the customer really received the product.
- • Deactivate or deny access to products. If you are a retailer who offers downloads or access to websites, you can stop a scam artist by denying access to your services.
- • Present a solid case to the credit card company. If you are diligent about maintaining records – including records of delivery or reimbursement and your return policy – this will greatly assist the credit card company and increase your chances for a favorable resolution in the case of a chargeback.
By Melody Lashmar
You have some ‘splainin to do
Things have been going along just fine but, seemingly out of nowhere, you are getting questions on your merchant processing. Technically, you are compliant with the payment association rules, so why all these questions? It seems that the things you used to do are now not accepted and things that were previously forbidden are now allowed again. And round and round we go. Perhaps the contradictory activities are best explained by some of the information provided in this article.
The FTC has been very busy recently Continue reading
As a business owner, it’s in the best interests of your company to guarantee customer satisfaction and loyalty. You want buyers to not only keep patronizing your goods and services, but to tell their friends about your products. Even though you work hard at building a solid relationship with your audience, you may encounter a scam artist who takes advantage of your good will. Online fraud can impact your sales and revenue and cause you to become suspicious of certain consumers.
Chargeback abuse can take many forms. For example, a thief may make a large online purchase with a stolen credit card and then turn around and return it for a cash refund or gift card. He or she can then purchase another item and sell it for cash. In some cases, the fraudster receives a “double refund” after receiving a refund from the online company and then a chargeback on the credit card.
As an Internet retailer, it’s imperative to have fraud prevention methods in place to protect your business from chargeback abuse. There may be honest customers who have a legitimate issue that necessitates the need for a chargeback, but high rates of return that are questionable can negatively impact your business.
Chargebacks can occur for many reasons, such as customer disputes, processing errors, authorization issues and non-fulfillment of orders. The more proactive you and your staff are about proper merchant procedures, the less likely you’ll be to do something that might result in an unwanted chargeback. And remember that chargebacks are not always the consequence of something merchants did or did not do. Card issuers and cardholders can be just as guilty in making errors.
Chargeback abuse is becoming a reality for many merchants, but for the diligent small business owner, it does not have to affect your bottom line. Take precautions when shipping to international addresses, of large quantity orders and repeated attempts to order on the same card. Fraud prevention measures can help you win the fight against e-commerce fraud.
Here at L3 Payments we all work very hard day in and day out, so when summer rolls around we like to take some time off (not all of us at once, of course) to recharge our batteries and do a bit of traveling. However, one person in our office recently took a trip that makes Bear Grylls look like Justin Bieber.
To give you some context, our underwriter, John Porichis, is known around the office for taking epic vacations each year. In fact, John has visited 6 of the 7 continents, with Antarctica being the only uncharted territory. Now, I’m no expert, but I’m pretty sure you have to be a penguin to go to Antarctica, so I won’t hold it against John if he doesn’t make it there (even though he tells me it’s possible for a human…and he would know!) But for all the cool stuff John has done, I think this latest adventure is the most impressive. John and his wife took a 23 hour journey from California to Tanzania where they spent 6 days climbing Mt.Kilimanjaro! It took 4.5 days to reach the peak at 19,345 feet and another 1.5 days to come down. Listen, I spent 1 night in a tent in my backyard with my son and nearly called it quits at 2:00am because I was uncomfortable and couldn’t sleep, so my brain can’t even begin to comprehend spending 6 days on the highest free-standing mountain in the world in freezing temperatures. So, hats off to John and his wife!
Here are some pictures from John’s amazing trip.
Also newsworthy this month, Melody Lashmar recently posted several informative articles; the most recent titled “Picking the Pockets of Merchants“. Here, Melody provides some interesting insight into how merchants and third-party processors are often the scapegoat when consumers overspend.
Until next time, we hope you enjoy the rest of your summer and please feel free to reach out to us on Facebook, Twitter, our blog, or via email (email@example.com) with any questions or comments. Take care!
By Melody Lashmar – It’s that time of the month again… I get cranky and tired and irritated. I know what you are thinking and I assure you, it’s not hormonal. It’s the result of the monthly roundtable call I participate in where I get updated on many of the ridiculous, and often government funded, attacks on merchants and third-party processors. To be fair, I will agree that not all the actions are ridiculous.
Every month the legal section starts with “WOW, it’s been quite a month”. The utterance of the phrase is almost laughable now in that there are so many “actions” against payment participants on the originating side of the equation that what should be “quite a month” is merely “business as usual”. All these actions seem to be in the name of protecting the forever-innocent consumer and the bank that services them.
Let’s see, this past month consumers were unable to make appropriate decisions Continue reading
In the retail world, con artists have always attempted to outsmart unsuspecting business owners. If they’re shopping in a store, they may swap one price tag for a lower one or purchase expensive merchandise for a special occasion, wear it and then return it, claiming that they had problems with the item.
Whether your business is brick and mortar or your primary profits come from an online boutique, you may be faced with the growing problem of “cyber shoplifting.” This is a phenomenon where swindlers try to con retailers out of merchandise by making purchases and denying they received them or claiming to send back products that the merchant never receives. If you’ve ever been hit with a bogus return, you know what a hassle it is to deal with the banks and fight the fraud.
The anonymity associated with making purchases online means the Internet retailer takes that payment on good faith. In spite of the challenges of cyber shoplifting, you don’t have to sit back and let it happen to your business. There are safeguards you can put into place to prevent fraud and reduce your chargeback rate.
Make sure your ordering process is clear cut. There should be no “surprise” fees, terms or conditions that would anger a customer. Some merchants may not mention a “service fee” until the order goes through, which frustrates the consumer. An angry customer is more likely to process a chargeback than one who is satisfied and feels that they got exactly what was promised. It’s also more challenging for thieves to claim deceptive chargebacks when your order process is explicitly stated on your site.
Documentation is key. Keeping a paper trail of all transactions can also guard against cyber theft. By documenting every step of a transaction (whether on the Internet or in a store), you can protect your business from fraudulent claims because you have the data to back up purchases. If you have a brick and mortar store, verify that the card information matches the customer’s driver’s license and always obtain a signature. A little prevention goes a long way.
Cyber criminals play many games to swindle small business owners. These thieves may make large purchases with stolen credit cards and the Internet retailer is none the wiser until a chargeback occurs. Con artists may also initiate chargebacks for merchandise they received but claimed was lost in the mail. They then resell the purloined product for a profit.
Even though cyber scammers have many tricks up their sleeves to deceive unwitting retailers, some small business owners are catching on to their schemes and choosing to fight back. Don’t let your small business become a sad statistic. In the case of one entrepreneur, he was conned out of an expensive cell phone by a deceitful buyer. The retailer refused to take the crime lying down. He fought back by turning to his social networks. Using an image that he had taken of the thief, he uploaded it online and also posted about the scam. Eventually, the con artist’s personal information was discovered and he was turned over to the authorities.
Anti-fraud measures can help save your small business. For example, always validate the order before it is shipped. You may ask the buyer to scan the front and back of the credit card and email it to you, as well as sending a copy of his or her driver’s license which provides additional proof that the customer is the true credit card holder. If the customer does not know all the information you are asking for, he or she is probably an e-commerce scammer.
As in the case of the phone thief above, you can also call the authorities to report the crime or call the cardholder’s bank and ask him or her to report the crime to the police in the city where the merchandise was shipped. By using these methods, you may be able to recover the stolen product.
Above all, always trust your gut. If the buyer or the transaction seems suspicious, don’t do business with the person. You may save yourself some grief in the long run.
In today’s digital landscape, it becomes necessary for online retailers to accept credit cards if they want to thrive and keep up with their competitors. Providing a way for your customers to pay with plastic shows that you care about their convenience, you’re flexible in your payment options and you stay abreast of the latest technological trends.
The downside of this, however, is that chargeback abuse can occur when credit cards are used. Dishonest consumers may engage in this growing cyber crime to get out of paying for their purchases. This may take the form of using stolen credit cards to pay for products to initiating false chargebacks for merchandise they claim was never received. In one case, also known as “friendly fraud,” a thief tried to get a refund for a pricy camcorder from an online retailer of photography equipment, but returned a box full of used power cords instead of the camera. Needless to say, his deception cost him in the long run.
Companies have to safeguard against these cyber crimes or else they may get doubly penalized: once when they lose the revenue from a sale and then again when they are hit with a chargeback fee. There may also be extra labor costs involved if an investigation is launched for the disputed charges.
In many cases of fraud, it will come down to your word against the buyer’s. There are several things you can do to battle deceptive chargebacks. Make sure to provide accurate descriptions and photos of merchandise on your website. These clear images can help prevent a chargeback due to a customer ordering the wrong product. Similar to the way some Mom and Pop stores post names of consumers who write bad checks, you can check databases for blacklisted customers who have swindled retailers out of money and merchandise.
Don’t allow fraudulent chargebacks to eat into your bottom line. Take measures today to protect your small business.