Having a firm grasp on fraud has become a normality for merchants of every realm. In 2011, merchants have reported that they have rejected 2.8% of their orders due to suspicious fraud. Businesses are becoming more aware of the idea that not every purchase is a safe purchase, especially for online Merchants. Specifically, rapid growing fraud for online Merchants has become chargebacks due to card-not-present (CNP) transactions. Because one cannot see who is actually making an online purchase, it gives the opening for the cardholder to place an order, but then contacting their bank stating that a transaction on their card was not their doing and therefore file a chargeback, this is known as Friendly Fraud.
Friendly Fraud is flourishing the web because of the ease customers have of accessing goods and services without any criminality by law stopping them. In 2009, retailers lost $139 billion to fraud and friendly fraud accounts for $3.4 billion. This estimate is not including the Merchants additional chargeback fees, rate hikes, and time and money spent fighting each chargeback. According to CyberSource 2012 Online Fraud Report, “nearly 60% of Merchants say Friendly Fraud has increased over the last two years.”
Merchants lose an estimated three dollars for every one dollar lost due to fraudulent transactions. What’s important for Merchants to invest in is representment service for chargebacks. With representment services, they can simplify the chargebacks for the merchants by managing the chargeback process. eResponseService is a representment focusing on the merchants who are using direct media response as their method of retail. Global Risk Technologies™ uses turn-key chargeback services with two diverse services: they respond to chargebacks filed against their clients; or offer a neutral third-party solution that prevents disputes from becoming chargebacks. Both services use two key elements, prevention and recovery.
Global Risk Technologies™ uses a unique “people element” for prevention of chargebacks. Instead of in call centers, they have, at all times, between 1-200 agents working to prevent chargebacks for their companies with their On Demand Service. Tools are also included as means of tracking a Friendly Fraud, one being IP geo-location. Recovery as well uses tools to regulate and report the collection of data and process needed to win back a chargeback for a Merchant. An example of data would be signed delivery slips from UPS and FedEx.
Another field included in the chargeback process is the issuing bank. Banks are becoming more aware of how Friendly Fraud is affecting Internet Merchants. Some banks have even taken an initiative to request a consumer sign and notarize an affidavit as evidence that fraud has occurred. Since Friendly Fraud is not considered a criminal offense, a notarized affidavit which presents a consumer stating false accusations creates a criminal offense. Banks are also able to see patterns with Friendly Fraud chargeback account holders that their financial problems stem in other directions to their accounts, showing repeat offenders.
