The present day techniques adopted by scammers to fool ecommerce merchants are so sophisticated and subtle, that the online payment fraud may go unnoticed even for months together, before they assume sizeable proportions to attract attention. One of the various types of online payment fraud that victimizes merchants is friendly fraud. This is resorted to by buyers using credit card and claiming that the card was not present when the online transaction was made. More and more decisions to report online payment fraud are arising from friendly fraud committed on e-tailers.
As the name suggests friendly fraud is a combination of confidence tricks and online payment fraud, where merchants are victimized by a fraudulent buyer. It is also referred to as chargeback fraud. A friendly fraud occurs in the following fashion:
- The fraudulent buyer makes a genuine purchase of goods and services using his own credit card and makes online payment
- After receiving the goods and services, the buyer approaches the card issuing bank or company and requests a chargeback from them
- The request is made by disputing authenticity of the credit card transaction which the fraudulent buyer will claim, has been made without his knowledge
- If the bank approves the chargeback and refunds the buyer, then the merchants are held responsible to indemnify the bank
- Every chargeback transaction exposes a business to considerable financial loss, including loss of products shipped, bank charges, penalties and other operational expenses in addition to time and energy spent when proceeding to report online payment fraud.
What works against businesses when they report online payment fraud?
The scoring points for the scammers when they fake card not present cases include:
- In case of online transactions, it is difficult for the merchants to prove that the card holder was present and was in possession of the card while making the transaction
- Anyone with the card number, date of expiry and CVV can make an online purchase. The buyer will claim innocence even where multi-factor authentication has been used, citing loss of card and mobile phones
- Especially in cases of services, it becomes all the more difficult for merchants to establish proof of delivery
It is possible for merchants to plead guilty and to file complaint with Action Fraud, the FBI or the FTC, refuting the chargebacks. Some other proactive techniques will help the merchants to mitigate damages after they report online payment fraud.
- Building in a service suspension feature in the product which will get activated the moment a chargeback is inflicted on the merchant
- Subscribing to services of professional online payments solution provider who incorporate advanced technology and can guarantee and validate every credit card transaction. These customized solutions can be seamlessly integrated with the merchant due to their easy-to-use APIs. These products assure 100% payment guarantee to the merchants and do not allow for expensive chargebacks.
Realizing the financial woes of millions of online retailers and to handhold them to report online payment fraud, credit card companies as well associations of e-commerce merchants are joining hands to combat online payment frauds. They raise awareness and invest in research and development of quality products that can be subscribed by businesses to provide secured solutions from online payments fraud.