According to the Wall Street Journal, the problem of “friendly fraud” has increased by 50% since October of last year. That’s a significant spike brought on, no doubt, by the current economy. More and more people are stealing from merchants in order to get items for free.
Unfortunately for on-line merchants, this type of fraud can be carried out by anyone and it’s difficult for the merchant to reverse the chargebacks. Cardholders can’t pull it off more than a few times before their card issuers get suspicious but that’s no comfort to the merchant that shipped a $1500 digital camcorder and ends up with no camcorder and no money.
Following e-commerce best practices can give the merchant a better shot at reversing the chargebacks.
Ship only to the bank verified billing address and use AVS for every transaction. Try getting the customer’s phone number verified by the issuer for a bit of extra protection.
Use shipping services that will get a signature to confirm the delivery and request that only the addressee be permitted to sign. This can be proof that the cardholder actually received the goods.
Make sure that you clearly post your return policy on your web site. This must be a Legally Enforceable Online Contract. (LEOC) It must include product warrantee, return time restrictions and other requirements. To be an LEOC, customers must explicitly acknowledge that they have read the terms. Provide a check box or radio button for acknowledgement.
Remember that, unless you are paying for it, fraud checking isn’t part of what your payment processor does. If you are a high volume merchant, you may want to pay for some form of fraud checks. Merchant911 recommends the ones listed in the resources section of our public pages. As a member, you get lots more resources to work with.
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Thankfully, most of our customers are other businesses or government agencies. But, I take it upon myself to scrutinize each order that comes in. I am not afraid to call the “customer” to verify information. And, we get tracking numbers on all of the orders that are sent.
When the card associations launched SecureCode and VbyV, one of the drivers was to remove the risk of friendly fraud, since having to identify yourself to your bank meant that it was difficult for the cardholder to dispute the transaction.
Plus under the rules by implementing SecureCode and VbyV the merchants give themselves protection against chargeback even if the cardholder or indeed the issuing bank have not registered or do not support SecureCode or VbyV. So really a no brainer!
Nealle