Fraud in the eCommerce space isn’t something new. Moreover, it’s growing rapidly worldwide, thus becoming costlier and more common with each year. To know the difference between legitimate and friendly fraud, and find the right high risk merchant account, just read below.
True Vs Friendly Vs Chargeback Fraud
What’s fraud? Well, it occurs when fraudsters apply wrongful or criminal tactics to gain financial or personal benefits. Online payment fraud is still a major threat all over the world. According to Juniper Research, retailers will lose $130 billion in the upcoming 5 because of card-not-present (CNP) fraud. Besides. eCommerce is anticipated to lose $31 billion because of chargebacks by 2020.
- True or Malicious Fraud
This is also called “identity theft” and occurs when a stolen card is used to accept a payment.
- Friendly Fraud
This one is closely related to chargeback fraud and isn’t associated with malicious practices. Friendly fraud can be the result of simple forgetfulness, unknown purchases made by family members, and when the cardholders don’t understand merchants’ return policies.
- Chargeback Fraud
This one is the result of a fraudulent request for a return/refund in the form of a chargeback. In this case, the customer lies about a transaction on purpose.
Given the growing threat of online payment-processing fraud, it’s vital for merchants to prevent fraud and fight chargebacks. Working with a true merchant-services comparison expert in the UK, you can find the most secure, advanced and cheapest fraud prevention and chargeback-mitigation services.
Look for a payments-comparison company that reviews contracts, rates, and fees to provide you with the best deal, including the best high risk merchant account. Also, make sure the comparison company keeps you away from hidden costs, and deceptive sales tactics.
Chargebacks, Merchants, & Refunds
When it comes to chargebacks, when a fraudster processes a payment via stolen cardholder information, the cardholder has a right to demand a chargeback to get back the funds. So, chargebacks serve as a consumer protection mechanism. They often happen when a consumer calls his/her card-issuing bank instead of contacting the merchant to dispute a transaction.
The problem with chargebacks is that they don’t always occur because of criminal fraud. That’s why friendly fraud is among the most rapidly-growing threats in the online space. By the way, in 2018, the UK Cards Association (UKCA) reported that the number of debit/credit-card purchases in the past 10 years had more than doubled.
As for merchants, no matter they’re dealing with chargebacks because if friendly or chargeback fraud, they face:
- Lost revenue
- The lost product cost
- Costly chargeback fees/penalties
- The potential loss of their merchant accounts
- Damage to their reputation
What about a refund? Well, customers request a refund mainly due to the fact:
- They don’t want the item anymore
- Because the item is damaged
- They haven’t purchased the right item
- The item has been delivered too late
Unlike chargeback regulation, retailers can build their own refund policy.
To sum up, eCommerce is gaining more popularity across the world. Fraud, especially the CNP one, is growing as a result. So, take the time to find a reputable payment processor that can protect you best.
Author Bio: Payment industry expert Taylor Cole is a passionate merchant account expert who understands the complicated world of accepting credit and debit cards at your business. His understanding of the industry, including a high risk merchant account, has helped thousands of business owners save money and time.