Smolder Fraud & Chargebacks Online

Give your loyal customers an “express lane” and send your fraudulent orders packin’

By Paul Loeffler

Fraud and chargebacks can be a headache for any business owner. Disputing a chargeback is time consuming — for every $1 a fraudster takes, it costs businesses $2.40 to manage. Yet if unmanaged, fraud and chargebacks can cause your merchant service provider or payment payment processor to increase rates you’re charged, and sometimes entirely stop accepting payments for your business.

Dealing with fraud and chargebacks afterwards is a lose-lose situation — the best option is taking steps to avoid this drain on your business.

There are plenty of ways to prevent or reduce chargebacks that are within your control and add little to no friction in the consumer experience.

1. Underpromise and overdeliver. Do your customers know when to expect items to be delivered? Is your return policy customer friendly and easy to understand? Set clear expectations with your customer across all of your business terms. It is important to set expectations that you know you can meet and exceed.

2. Keep open lines of communications. According to a study by TARP Research, only 1 out of every 20 unhappy customers will actually complain to you, leaving the remaining 19 to solve a problem on their own terms — this where non-fraudulent chargebacks usually originate. By keeping open lines of communication with your customers, you can detect and address unhappy customers more effectively while also reducing your chargeback rates.

3. Account-based sales so details match up. No bad actors will commit payment fraud and deliver the item to their home. In many payment fraud cases, the first risk indicator is when the billing and shipping address don’t match. Unfortunately, there are plenty of legitimate reasons why billing and shipping addresses might not match (e.g. sending a gift to someone) and it can gouge sales to ban these mismatches altogether. A happy medium is inserting positive friction to the purchase journey by asking new customers to create an account and provide them with a discount for their first order. The account details should often align between shipping and billing addresses, allowing you to separate good customers from bad customers more easily.

4. Verify age and identity during checkout or account signup. “I’m already covered — my customers put their age into a popup when arriving at my site.” This approach creates unnecessary friction for your customers and doesn’t cut it with regulatory agencies. If you’re encouraging account signups per my recommendation above (for most wholesalers, this is practically a requirement), it’s not too much to ask your customers to verify their age or identity in the process. As for guests, ask to verify them during checkout after they’re committed with a few items in their cart. Nearly 90% of age and identity verification results occur in less than 1 second with a service like Token of Trust and it reduces fraud by as much as 90% as well!

5. Make it easy for your returning customers. The average small eCommerce business spends $25-45 in marketing, advertising, and sales to acquire a new customer. Don’t forget that your loyal customers are valuable, less expensive, and trusted buyers. Recognize them through services like Token of Trust so that they avoid even an extra second at the checkout process all while mapping their tokenized identity to an order. Thus, keeping the consumer’s identity safe and keeping your business safe from fraud along with a clear auditing trail.

It is critical that your new and loyal customers have a great experience with the e-commerce portion of your business. These simple steps can help you grow your online business without allowing fraud and chargebacks to get in the way.

Need some help with managing chargebacks and fraud? Reach out to Token of Trust at 1-833-738-0038 or - our specialists would be happy to provide a free consultation on how to manage your online fraud and chargebacks.