Support Tip – Fraud

Tis the season to be fraudulent. Christmas sales have already spiked for our merchants, which is an indication that the economy is benefitting from consumer confidence, but this is also the time of year that we see an upturn in fraud and fraudulent sales activity, particular to web-based retailers. As a reminder, the card brands (Visa/MC/Disc/Amex) all have similar rules when it comes to consumers who use their cards for online purchases as well as for merchants that accept those cards. Basically, cardholders have the right to dispute a charge, which will result in a chargeback to the merchant and immediate debit to the merchant for the disputed sales amount.

Two main types of common fraud are fraudsters using stolen card data and friendly fraud. Since merchants expect increased sales during the holidays, they may become complacent in using their fraud tools to detect potential fraud, so it is especially important to review the pending sales in your payment gateway every day to review sales for suspicious indicators, such as unusually high ticket amounts, orders shipped to different addresses than registered with the cardholder, multiple orders with the same card number, etc. If in doubt, a call to the cardholder is prudent.

–Friendly fraud is when a merchant transacts and ships what appears to be a legitimate order only to have the consumer initiate a chargeback for non-acceptance of the goods ordered. This can happen even if the shipper confirms the customer’s shipping receipt with a signature! How can that be, you say? Well, a consumer could claim that the box in which the goods arrived had a phone book and not the $2500 laptop computer that was ordered. Or possibly, someone at the residence ordered the goods with another’s card and the real cardholder was not aware of the purchase. There is no way to definitively prove them wrong, and the merchant would likely take a loss from the sale. To prevent this kind of fraud, there are some technologies that could help identify potential friendly fraudsters, but moreover, it’s good to know your customers (perhaps from repeat business); completely disclose all relevant policies regarding billing, shipping, and refunds; immediately put customers on notice at the first sign of purchase abuse; and aggressively fight and refute chargeback claims.