A 5-Fold Defense: The Evidence You Need to Successfully Dispute a Chargeback

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Ecommerce companies put a lot of resources into detecting and declining fraudulent orders made by criminals who’ve acquired stolen credit card information. This is in their best interest: blocking those fraudulent orders means preventing expensive chargebacks (refunds awarded to the cardholder after they successfully dispute a charge). The real cost of chargebacks is much more than just the value of the refunded purchase, however—there’s the cost of replacing the merchandise and fees levied by the merchant’s payment processor.

Yet there’s another, more indirect hit from chargebacks as well. If the percentage of a merchant’s transactions which result in chargebacks exceeds a certain threshold (often 1 percent), that payment processor can terminate the merchant’s account—leaving that merchant unable to accept credit or debit card payments, and therefore, unable to even do business on the web. Although ecommerce fraud prevention solutions which include chargeback protection are a must-have for any brand doing business on the web, that reimbursement does not solve this chargeback threshold problem.

While etailers focus their efforts on fraud prevention—and rightly so—it’s important to remember that not all chargebacks are the result of fraud. So-called “friendly fraud” (also referred to as “liar buyer”) contributes to an increasing number of chargebacks. Friendly fraud refers to abuse of the chargeback process, and is much harder for merchants to guard against, because it results from a real shopper using a legitimate credit card. Typical friendly fraud scenarios include simple buyer’s remorse or purchases made by authorized family members of the cardholder, yet the actual cardholder doesn’t want to pay.

An ecommerce merchant’s only defense against friendly fraud is to dispute the chargeback by providing ironclad evidence that the cardholder authorized the purchase. Since the burden of proof lies with the merchant, collecting and preserving digital evidence is critical. Fortunately, some of the same tools ecommerce companies use to block fraudulent orders can be used to gather this evidence.

Order data is your best defense

To successfully win a chargeback dispute, merchants need to prove that the cardholder made an authorized purchase. Thus, any proof which shows the transaction in question wasn’t made by a fraudster can help build that case. This proof includes:

1. Records of positive AVS and CVV matches

Although not conclusive on their own, these can help show that the order wasn’t clear-cut fraud.

2. Address matches

To bolster the case that the customer made the purchase, a merchant should show that the billing address details and the customer’s name are linked on publicly-accessible listings. Ditto for the customer’s name and the shipping address provided with the order. Matching shipping and billing addresses can also be a powerful piece of evidence when combined with a positive AVS match, because fraudsters always need the merchandise delivered to them, not the legitimate cardholder. These address matches, therefore help rule out credit card fraud.

3. Copies of all electronic communications

This is one of the many reasons why merchants should retain records of all text and email communications from the mobile phone number and/or email address given in the order details.

4. Signed proof of delivery to the cardholder’s shipping address

A common excuse given by buyers committing friendly fraud is that they never received their order. A signature collected by carrier (with the corresponding time and date) can effectively refute that story.

5. Internet Protocol (IP) data

Many of the fraud prevention solutions available to merchants include the ability to determine if the order came from someone using a proxy to hide their true location. Since this can make orders appear to originate from someplace they didn’t, fraudsters often use proxies. If the merchant can prove that no proxy was used, and that the geographic location of the IP address is close to the shipping or billing address, that’s strong evidence that the transaction was authorized by the customer.

It goes without saying that the best protection ecommerce businesses have against chargebacks resulting from friendly fraud is to prevent them in the first place. The time and resources expended disputing a chargeback can be high even if the merchant wins. Clear and visible return policies combined with top-notch customer service can resolve an issue far more cheaply than the chargeback process. Nevertheless, collecting the five types of evidence listed above can be your best defense against friendly fraud.

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Contributing author for TechSpective.