How to Effectively Use Chargeback Prevention Tools
Utilize the Latest Technology to Reduce Risk and Retain Revenue
Chargebacks are a frustrating part of doing business for many merchants. However, as technology has evolved, various chargeback prevention tools have become available to help prevent them. When used effectively, these devices can help to reduce risk and maximize revenue.
There are two types of lists that can help prevent chargebacks. A blacklist tackles fraudsters at the individual level – merchants can use this to block unique IP addresses and email addresses to prevent reoccurring problems.
Similarly, a whitelist also works to help merchants filter their customers at a larger level. Instead of focusing on the individual, a whitelist helps to block large populations with exceptions made for a select few.
Both lists help merchants mitigate risk by limiting transactions by individuals and specific demographics that will likely result in chargeback disputes.
Once in possession of an unsuspecting individual’s credit card information, a criminal will attempt to make as many purchases as possible before being caught. This is referred to as “running” a card – and if the fraudster is successful in his first attempt, he is likely to continue with the same card or a different one.
Setting a velocity limit allows merchants to restrict the number of purchases that can be made in a specific period from a single IP address. This way, merchants can observe the frequency of transactions. If they see that multiple purchases have been made (or attempted) in a short period, they can take the necessary steps to block that IP address from making future transactions.
Trust, but Verify
Most consumer’s intentions are good, but it is still important to verify information to prevent chargebacks.
Card security codes are particularly helpful for businesses that specialize in card-not-present transactions. To ensure that the person making the purchase is not simply a criminal that obtained the account information, ask the customer to supply the card security code to verify that the card is in hand.
Another helpful verification tool is the Address Verification Service. This automated service compares the billing address given during the checkout process to the billing address provided by the card’s issuing bank. If these do not match, this signals to the merchant that the person participating in the transaction is likely not the issued cardholder.
3D Secure, a chargeback prevention tool built into each card network, allows consumers to create a unique identification number for their account. By requesting this code during the transaction process, merchants can be sure that they’re selling their product to the correct person.
It is critical to maintain industry connections that can help alert the merchant to risks before they become liabilities.
Visa Account Updater is helpful in keeping merchants up-to-date on cardholder account information; when the information changes, merchants are notified. Many chargebacks are associated with transactions processed with incorrect card data, and this tool helps to eliminate that.
Chargeback alerts allow merchants to get a jumpstart on handling fraudulent purchases. When victims contact the bank to report a transaction, the bank then makes the merchant aware of the situation – and gives the merchant the opportunity to provide an immediate refund, avoiding a chargeback.
The Best Approach
There are many effective chargeback prevention tools that merchants can utilize in their day-to-day operations. However, they alone cannot perfectly prevent fraud. Pairing these automated technologies with the power of human involvement is the best way to eliminate chargebacks and maximize your revenue.
If you’d like help in successfully preventing chargebacks, let us know. We’ll look at your current chargeback management efforts and let you know if we can help save you money.