The impact of the internet has made people nowadays be comfortable in shopping online and make e-commerce shopping experience a lot easier. More and more products and even services are made available for digital shoppers. And the presence of these e-businesses and online retailers uses online payment gateway services to be able to receive digital payments from the buying customers.
Payment gateways as in-between services which process the information provided by the customers during checkout and facilitate the authorization and fulfillment of the payment from the customers’ cards to the online merchants.
As these online businesses emerge, same goes with e-commerce problems such as chargebacks and fraudulent transactions. There are industries that have higher risks involved because of its susceptibility to online payment fraud and chargebacks and have to get and maintain high risk merchant accounts to provide them with the merchant services that their businesses need.
Digital payments have been targeted by cybercriminals because it is more difficult for merchants to verify the identity of the actual cardholder who is making the purchase because of the lack of physical presence. The most common type of online payment fraud is chargeback fraud or commonly called as friendly fraud or chargebacks that aren’t true fraud. This happens when a customer makes a digital purchase then disputes the charge later on by contacting the credit card issuer after receiving the purchased good or services because of an honest mistake. The friendly fraudster is likely to be confused, misguided or even forgetful. The reasons for the customer’s dispute ranges from the customers’ claim that the item or services bought were not delivered, the item was returned but wasn’t able to receive a refund to the reason that the customer could not remember making the purchase and think that their credit card has been compromised. For subscription services, customers may be unaware that they have legitimately agreed for a recurring bill or may have forgotten that they have agreed to do so. There are industries that are more prone and are struggling to combat friendly fraud and it occurs most often among high risk industries such as online pharmacy, travel services, event ticketing, and even online video gaming, online gambling and online dating. These online payment frauds add up to the difficulty for the said high-risk merchants to get the Retail Merchant Accounts for their business.
Some instances on how friendly fraud happens in high-risk industries.
Online gambling merchant account for online casinos faces fraudulent transactions caused by the customers not wanting to be known that they are into gambling. A customer who secretly made online bets and suffered losses may file for a chargeback and claim that it wasn’t him that placed the bets and that his credit card of stolen.
Married men and women who seeks to have an affair secretly enrolls to online dating services but once caught by the spouse or their partner, they will instantly claim that their credit card was stolen or hacked and that they didn’t know anything about the enrollment on the online dating platform and this file for a chargeback.
Another common story for online dating merchant account is facing customers who have initially agreed for subscription-based online dating services but cancels the subscription and request for chargeback after failing to find a partner.
Travel merchant accounts often faced friendly fraud from customers whose expectations are extremely high and complain if their experience doesn’t match with what they hoped for or expected. Some customers will enjoy the first few days of their vacation but once they are faced with even the smallest amount of unpleasantness in their travel will immediately call the card issuer and ask for a chargeback. Other instances are customers who book their travel months before and changes their mind at the last minute thus filing for a chargeback.
Examples of products that online retail stores sell are wearable like clothing & watches, beauty products like makeups and electronic like gadgets and computer parts.
Often situations experienced by retail merchant accounts are customers who purchase during the peak shopping season and expecting their products to be delivered on time although they were advised beforehand that deliveries may be affected due to an influx of orders. Once they realized that the ordered products will not arrive on their expected date, they will call the card issuer and file for a chargeback.
Mobile phones have evolved its functions nowadays and have become one of the most important devices for people to bring in every day. It is used for communication purposes, productivity and even for recreation. Online gaming has been widespread especially for kids and teens. There are ardent gamers who are so immense in playing the online games that will borrow their parent’s card and use it for their gaming subscription unknowingly to the cardholder. Online gaming merchant accounts faced chargebacks that are filed once the actual cardholders notice the online gaming charges on their monthly credit card statements which they have not made of.
Event ticketing services have also experienced friendly frauds. It is very common to have this non-transferrable rules and no refund policies but it is also common that customers change their plans and can’t make it to the event that they have purchased their tickets from. In cases like this that consumers can’t go through the vendor for a refund, they are most likely to initiate a chargeback through their issuing bank.
Friendly fraud is also present in online pharmacy merchant accounts. Customers may change their mind after hitting the buy button or the buyer’s remorse or may find the delivery of the ordered product too long and file for a chargeback instead of waiting for the product to be delivered.
Mitigating fraud can be a big challenge for merchants. Minimizing friendly frauds can help merchants minimize chargebacks.
1. Using a recognizable billing descriptor is a must to avoid confusion from customers that may lead to them filing a chargeback. A poor billing descriptor may lead the customers not being able to recognize that they have legitimately bought from the said merchant.
2. Publishing a clear refund policy is helpful in making sure that the customers are informed that they can request for a refund or a replacement than initiating a chargeback.
The facts demonstrate that specific high risk businesses experience the ill effects of fraud more than others. From our involvement in offering online payment gateway services, however, merchants who take the time to mitigate fraud attempts can enjoy lucrative businesses.
Our profession is to enable merchants to get there offering the assets they require: check payments, mobile wallet solutions, and credit card processing as well as the fraud and chargeback protection to go with it.
We prefer to start the online payment gateway services relationship with a conversation, call us at +44 800 776 5988 or click here to set up your personalized payment consultation.