AI DRIVEN FRAUD PREVENTION

chargeback frauds

Chargeback Frauds Setting Back E-commerce Businesses: Is There a Way Out?

The return and refund policies by e-commerce platforms are drafted in a manner, so as to make it easier for the consumers to claim refunds on a product which was faulty or damaged when received, or didn’t match the description as provided by the seller on the website or app. One variety of refunds available to consumers on e-commerce platforms is known as Chargeback

What is Chargeback?

Chargeback is the reversal of payment made through Debit/Credit Card by the user, which is debited directly from the bank account of the e-commerce seller. Chargeback enables a buyer to claim the payment back from the seller in case it was made mistakenly, protect the consumer from fraudulent sellers, or in case of identity theft. 

There are numerous instances in which chargeback can be availed by the consumers from e-commerce seller. These instances include:  

  1. The Quality of the product or services received were not as advertised by the seller at the time of purchase.
  2. The consumer claims that he/she has fallen victim to identity theft or has not sanctioned the purchase.
  3. There has been some mistake in the Billing amount, or there are issues regarding duplicate billing of a purchase made.
  4. The product or service purchased were not received by the consumer.

Chargebacks are created to protect the consumers from deceitful sellers online, however, this option for refund has been grossly misused by consumers in the recent years. Criminals have found lacunas in the chargeback process and intentionally misuse the option to swindle e-commerce businesses of millions in revenue!

A person commits chargeback fraud by authorising a credit/debit card transaction, receiving the product or service, and layer filing a false chargeback request to get the item for free. Common chargeback frauds suffered by e-commerce sellers include: 

  1. The purchased product or service received is claimed to be undelivered.
  2. The original transaction authorised is claimed to be unauthorised.
  3. The genuine product or service received is claimed to be faulty or deficient.

How Chargeback Fraud Affects E-commerce Businesses? 

E-commerce sellers are hit hard by chargeback frauds in the past years with the increase in digital payments and approval of credit card purchases. Online sellers not only lose a big chunk of their revenue to chargeback frauds, but their reputation and goodwill are also damaged immensely. 

The fraudulent consumers not only defraud the seller with false chargebacks but also end up leaving erroneous reviews and ratings, further injuring the business! In many cases, the bank in which the seller has its account ends up blocking the seller’s account thinking it is a scammer.

Is there a Remedy to Fight Chargeback Fraud?

There are numerous ways through which e-commerce sellers can fight chargeback frauds, the simplest being a clear return and refund policy on the website or app. The business must keep clear records of each transaction performed, and copies of every bill or invoice sent. 

A more advanced and sure shot way is to rely on technology! In an era of technological advancements and Artificial Intelligence, the smartest way to deal with chargeback frauds is to use fraud prevention tools which are powered by machine learning and automated data processing. 

E-commerce fraud prevention measures like ThirdWatch’s Mitra enables online business platforms to detect multiple kinds of frauds and abuses, including chargeback fraud in real time. With AI that wields the power of natural language processing and predictive analysis, Mitra is able to detect fraud by scanning each transaction on hundreds of variables! 

The e-commerce fraud prevention software is a powerhouse that quarantines fake or fraudulent transactions by marking them ‘red’ and approves genuine transactions by accentuating them as ‘green’ transactions. It also assigns every device through which a transaction is made, its own ‘fingerprint’ to check future transactions made through it.

E-commerce merchants need to be aware of the different frauds and abuse that have been costing them a mammoth amount of losses and employ intelligent measures to detect and prevent them. With AI-based e-commerce fraud prevention tool, e-commerce platforms can focus on their growth and leave the hard labour to machine learning!

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