3 Ways to Protect Your Business from Chargeback Fraud

Chargeback fraud, often referred to as "friendly fraud," is a growing challenge for small eCommerce businesses. It occurs when a customer disputes a transaction and requests a refund—even when the purchase was legitimate. Whether the intent is innocent or malicious, chargebacks cost businesses time, money, and, potentially, their reputation with payment processors.

Here are three actionable strategies to help protect your business:

Maintain Clear Transaction Records

Good recordkeeping is your first line of defense. Ensure that each transaction has:

• Accurate and detailed product descriptions.

• Delivery confirmations, including proof of delivery for physical products.

• Secure payment processing to verify customer credentials.

By having clear documentation, you’ll be better equipped to challenge chargebacks when they arise.

Leverage Fraud Detection Tools

Invest in tools designed to detect and prevent suspicious activity, such as:

• Address Verification Services (AVS): Matches the billing address provided by the customer with the cardholder's address.

• 3D Secure Authentication: Adds an extra layer of security by requiring customer verification during checkout.

• Transaction Monitoring Software: Flags high-risk purchases, like those with mismatched billing and shipping addresses or unusually large orders.

These tools work proactively, reducing the risk of fraudulent disputes before they impact your business.

Prioritize Customer Communication

A clear refund and dispute resolution policy can help de-escalate conflicts. To minimize misunderstandings:

• Provide transparent pricing, shipping, and return policies on your website.

• Respond promptly to customer inquiries about their orders.

• Resolve complaints directly, avoiding the need for customers to turn to their bank.

Proactive communication builds trust and deters customers from bypassing your business for a chargeback.

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Why it Matters

According to Chargebacks911, friendly fraud accounts for a staggering 60-80% of all chargebacks, making prevention essential for eCommerce businesses of any size. A high chargeback ratio can lead to increased payment processing fees or even loss of service from processors.

Take Action Today

Don’t let chargebacks eat into your hard-earned revenue. By combining clear records, advanced fraud prevention tools, and strong customer communication, you can safeguard your business and focus on growth.

Key Vocabulary

• Chargeback Fraud: A dispute initiated by a customer to reverse a transaction.

• Friendly Fraud: When a legitimate transaction is falsely reported as unauthorized or undelivered.

• AVS (Address Verification Service): A tool to verify billing address details during checkout.

Your Fraud Fighting Ally,

-De'Airra