The Importance of Being Proactive to Avoid Chargeback Losses

Published November 6th, 2017 by Servistree

Fraudulent chargebacks, also referred to as ‘friendly-fraud,’ are now considered a huge source of frustration for merchants. The fact is, there is nothing ‘friendly’ about these transactions. A typical chargeback occurs when banks force a refund for a credit card purchase their customer has disputed. 

Chargebacks were initially created as a method of protection for consumers. They allowed the customer to file a complaint and have the returns handled in a more expedited fashion for wrongful transactions. However, chargebacks are becoming more of an issue for merchants, with some consumers taking advantage of the regulations in place to protect them. This occurs when the consumer files a false dispute, having the funds returned to their account while also retaining ownership of the items purchased.  

With more consumers using mobile devices to make purchases, the number of friendly fraud cases has surged. In some cases, consumer misunderstanding is a part of the problem. Some may believe that filing this complaint to generate a chargeback is simply a faster alternative to receiving a refund. Other situations are more indicative of fraud, with customers attempting to have the funds returned while keeping the merchandise at no charge.

Excessive chargebacks can become harmful to merchants, causing a burden and costing them in terms of lost funds. One of the best ways to eliminate this issue is by providing 24/7 customer service. This has been proven as one of the most effective tools against friendly fraud. Some other steps merchants can take to better protect themselves include the following:

  • Create and employ the use of best practices  throughout an organization. Follow all rules and regulations created by payment  networks.
  • Request the card security codes from consumers.
  • Use AVS (address verification service) to help  prevent card-not-present transactions.
  • Enhance customer service for appeasing  unsatisfied customers.
  • Create a risk management plan for tackling  threats early on.
  • Balance the customer experience with security.
  • Create a company-wide blacklist. Once friendly  fraudsters are identified, don’t allow them to shop with your company again. 
  • Manage any recurring payments since these are  easy targets for friendly fraud.
  • Address issues with shipping
  • Discuss delays or discontinued merchandise.
  • When shipping larger, or big-ticket items,  utilizing delivery compensation.
  • Monitor sales of digital goods.

There is no end-all for friendly fraud. They key is to set up preventative measures to minimize losses that result from the unnecessary chargebacks. With superior customer support, an understanding of best practices for taking mobile orders and monitoring sales, you will be able to minimize the occurrence of these chargebacks for your business. 

When an issue does arise with credit card fraud, consumers have peace of mind they have an option to get their money back. However, now they are using this protection to line their own pockets, hurting businesses in the long run. This is why it is essential to take proactive steps to minimize issues of chargebacks for your business, which will help ensure they do not cause excessive losses in the long-term. 

Contact ServisTree today to learn more about credit card fraud and the  effects it can have on your small business. You can visit us online at or contact us by phone or email. 

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