To mark Fraud Prevention Month, one financial technology company is offering tips to protect against chargeback, which it says has climbed steadily during the pandemic.
Chargeback occurs when a customer disputes a card purchase and successfully has the payment refunded, but is often a fraud.
Moneris‘ vice-president of customer experience, Yale Holder, says they recorded over 300,000 instances in 2021, costing Canadian businesses tens-of-millions-of-dollars.
“It could be legitimate because the cardholder had the card compromised, and therefore it was a fraud charge,” Holder explained.
“However the concern we were seeing is there has been an increase in what we call ‘friendly fraud.’ So these are actual cardholders using lax security measures by businesses to dispute actually receiving the goods and services.”
Holder’s biggest piece of advice for businesses is to not accept card purchases over the phone, since it’s incredibly difficult to verify the person on the other end is the actual cardholder.
“(The) first thing we want to encourage is that once you get notified of the chargeback, take steps early to get all your information, get your receipts, get proof of the transaction, and you can (beat) a large number of these chargeback attempts,” Holder said.
Aside from that, Moneris says there are simple steps that can be taken to lower the likelihood of chargeback in the first place.
This includes ensuring policies related to returns and cancellations are clearly stated, and watching for suspicious purchases that might appear random and expensive.
Online sales are generally safer, Holder says, but can be made even more so with the use of authentication tools.
“There are tools like Kount and 3DS 2.0, and they use things like estimates, confirmations … to verify the identity of the person on the other end,” Holder said.
Despite how prolific chargeback has become, Holder said only 15 per cent of small businesses attempted to dispute the claims last year.
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