Eliminating chargeback fraud13 April 2005
Chargeback fraud is when a legitimate credit or debit cardholder uses their card to purchase goods or services online or via mail order, and then when their card statement comes, claims that they never authorised the transaction, or they never received the goods or service ordered.
Here are some practical tips on reducing your risk of becoming a victim of chargeback fraud.
- There are a number of protection schemes run by credit card companies which aim to protect retailers from chargeback fraud and other forms of card-not-present fraud. These include MasterCard SecureCode and Verified by Visa, and Barclaycard is currently piloting a new initiative in this area.
- Be suspicious if a mobile phone number, free e-mail address (like Hotmail) or a generic-sounding address (such as 123 High Street) or PO Box address is used. You can't stop people from using their mobile phone as a contact number, but you can state that you may ring the number to verify the validity of the order. Alternatively, obtain a landline number for the address through one of the Directory Enquiries companies, and use this to verify the order.
- A particular trick used by these fraudsters is to provide a fake address and wait outside it for the courier or delivery service to arrive. By pretending to be on the way out, the customer is able to intercept the goods without the courier checking whether they actually live at the address given. Make sure whoever is delivering your goods is aware of this type of scam.
- You can also use the Address Verification Service (AVS) offered by most card issuers to verify a cardholder's billing address with their records. AVS is available for all UK-issued MasterCard, Visa, Switch and American Express cards - type 'AVS' into a search engine for contact websites for each of the major cards' AVS systems.
- It can be more difficult to verify cardholder details outside the UK, so treat overseas orders - especially high-value or large orders - with caution. It's worth using a secure courier service for delivery, and make sure your courier knows that they need to get signed proof of delivery.
This PDF factsheet from the Association of Payment Clearing Services (APACS) provides an overview of the problem of chargeback and card-not-present fraud, along with dozens of practical tips for reducing the risk in your business.
CardWatch is also run by APACS and offers advice for retailers on eliminating card fraud, as well as an overview of the Chip and PIN system, a jargon-buster and a range of useful publications.
