Chargeback protection is a common blind spot in fraud prevention programs. Too many companies don’t have ample data to spot the differences between real chargeback claims and false ones.
While real chargebacks are great for consumer protection, these claims can be costly when criminals exploit them. In fact, this issue could cost as much as $50 billion by 2025. It’s time to stop chargebacks as a cost of doing business and deploy a chargeback protection solution.
Why do so many chargebacks happen?
Not all chargeback claims are inherently fraudulent. Some customers file a claim because they don’t recognize the transaction. Others feel it’s the easiest way to get their money back if they’re not happy with the purchase.
Poor processes can result in a high number of chargebacks, like:
- A billing description that makes the transaction hard to recognize.
- Common problems with shipping delays or damaged items.
- Product descriptions and images that differ from what shoppers get.
- Customer service failure to give refunds in a timely manner.
- Shipments were processed even though the customer canceled the order.
You might be unknowingly creating an ideal breeding ground for friendly fraud because you have outdated return policies or because customer service is overwhelmed. It’s also important to know how COVID-19 has affected your different processes. Many businesses are switching to online orders as their primary channels or seeing higher volumes than usual. This can result in issues with shipping or customer service.
Chargebacks can also come from lax policies for verifying transactions. For instance, Facebook used to have a really high chargeback ratio of 9% for in-game purchases. Young users could buy items with their parents’ stored credit card details without having to enter a password.
Lax security gives criminals more chances to commit chargeback and other types of fraud. Criminals look for businesses with loose return policies and old account security practices to target.
It’s estimated that false chargebacks account for 80% of all chargeback claims. It’s a costly problem since you lose the profits of the sale, the cost of the goods or services sold, and the potential fees from card networks. On average, the cost of chargeback fraud is a whopping $3.48 for each dollar stolen.
What is 3D Secure chargeback protection?
3D Secure is a protocol designed with chargeback protection in mind. It’s an authentication method first developed for Visa. However, other card issuers have now adopted it.
3D refers to the three domains this protocol covers. It facilitates the process of sharing data between the acquiring bank, the issuing bank and the infrastructure domain when a purchase happens.
This method enables more authentication steps that the issuing bank is responsible for. The shopper will have to confirm the transaction by entering a code they get via text message or enter a password.
In the future, 3D Secure 2.0 will share richer data between the three domains involved. It will also authenticate users based on their shopping history, device information or other data points instead of needing them to complete another step.
What are the benefits of 3D Secure?
- It stops card-not-present fraud by relying on extra validation measures to verify the identity of the shopper.
- 3D Secure increases protection for the merchant. With this protocol, the issuing bank is responsible for authenticating the user. This means there is a liability shift, and the issuing bank becomes responsible for any losses that result from a fraudulent act.
- This system enhances protection for consumers. It makes it harder for criminals to use a lost or stolen credit card.
- 3D Secure improves communication and transparency. When paired with good customer service, this protocol helps shoppers track the transaction status. It also results in fewer friendly-fraud chargebacks.
- It’s easier to monitor key metrics with 3D Secure in place. These metrics include your chargeback ratio, checkout abandonment rate and automatic decline rate.
Chargeback protection with Fraud.net
At Fraud.net, our goal is to deliver a seamless customer experience while achieving better chargeback protection for merchants like you. Our team can help you lower your chargeback ratio with the following tools:
- We specialize in implementing the latest cybersecurity tech. This includes protocols like 3D Secure to identify shoppers with extra authentication measures during the checkout process.
- We offer machine learning fraud detection solutions instead of traditional rules-based tools that fraudsters can learn to reverse engineer. Our solution has unparalleled results because it leverages multiple data points to paint a complete picture of each transaction and spot anything unusual.
- Our cloud-based architecture lets us deliver solutions tailored to your needs through a fast implementation process. As a result, we improve fraud protection in a timely manner.
Contact us to find out more about 3D Secure and other fraud prevention solutions. Or, sign up for a free demo to see for yourself how our solutions can help you fight fraud.