Challenges to run a business never end. When you deal with one problem, others come around.

But one challenge that is constant throughout the years, if the necessary precautions are not taken, the risk of payment fraud increases.

Fraud, the enemy of business growth

Businesses lose a large amount of money every year due to the fraud and chargebacks.

If you are not doing anything to defend yourself from real and friendly fraud, be sure that you are going to lose money and that’s not good for your business.

Failing to keep fraud under control will not only cost you in lost chargebacks, it will also affect your reputation.

Too many chargebacks and your merchant service provider will forcefully limit your accessibility to accept credit cards and debit cards. If the situation is even worse and you are facing excessive chargebacks, your merchant account could be terminated permanently and you have nothing to do about that.

Besides, these heavy loads of chargebacks will lead to higher fees and rates that you’ll have to pay for the debit card and credit card processing.

As you can see, the consequences are scary, even for businesses with a strong position in the industry. So without wasting your time, you should know how to tackle the fraud and limit it.

But before that, you’ll have to understand what fraud is and why we categorize fraud as Real Fraud and Friendly Fraud.

Real Fraud & Friendly Fraud, what are they?

Before you ask, YES, Friendly fraud is a “thing”.

It’s real and we didn’t make it up. However, this fraud is not friendly at all, despite what the name suggests.

When the consumer has buyer’s remorse or he claims that the product didn’t reach him or he didn’t purchase the service, the fraud is categorized as friendly fraud, even though there is nothing friendly about this fraud. Having said this, the claim is sometimes true. Your consumer could be telling the truth. But more often than not, people are trying to avoid paying for the items and services they received.

And the real fraud is what we all think of when we hear the word “fraud”.

In simpler words, real fraud is people trying to make an unauthorized purchase or a hacker trying to use a stolen credit or debit card.

How to keep fraud in check

For retail shop owners and more importantly, the online business owners, it is important to keep fraud counts in check.

The more you can prevent this fraud the more chargebacks you can avoid. So here are some tips on how to keep fraud in check.

Ensure the card owner is the person who is using it

The person who is using the credit or debit card might not be the owner of the card.

But how could you be sure if the user is the actual owner or not?

The answer is simple.

You have to ask for all the information on the card.

Make a form asking the card owner’s name, their address, the card number, and the expiry date of the card. And to be absolutely sure, ask for the security code that’s behind the card.

Have a clear and precise refund or return policy and let the consumer know about it

I have seen a lot of entrepreneurs not taking the time to finalize the terms and conditions of their site. Their customers then purchase their products and request refunds or return them.

Not having such policy written in advance can cause serious complications within your business, especially with the customers. When they don’t know what your policies are regarding the refund or product return process, they might question you about it and show you the urgency. In this case, if you don’t have proper terms ready for the refund or return, you can’t ask them to give you the time needed to sort that out with your payment processor. At the end of the day, you will lose your valuable relationships with your customers.

To avoid this, you must have the terms prepared beforehand so that you can reference them in disputes.

Sometimes, just having them prepared won’t suffice. Best is if you could send the key points of the return, refund or exchange policy with the mail confirming their purchase. This way, they can have access to the information they need in one place and you’ll be able to avoid the situation or handle it well.

Look out for fraud

Sometimes the best way to avoid fraud is keeping the purchases or orders under surveillance.

If you think about them, it’s not that difficult to identify potentially fraudulent activities.

For example, say you received a delivery order from the card whose owner is Paul. He has 5 Maple Street as his billing address. But he asked his order to be delivered at 12 Palm Beach Road.

Seems weird, right?

Flag them.

Flag all the orders that seem suspicious.

Yes, I know that he could have moved or just staying there for a while but being aware and careful will do no harm.

Track your customer’s shopping behavior

Your customer’s shopping behavior says a lot about them.

If you could asses them properly, they can come in handy for future reference and identification of fraud threats.

For example, if Paul was using your services twice or three times a month and paying you $50-$100 each month and suddenly orders the same service 4-5 times a day, billing $500-$800, it should be looked at.

This is just one example. There are other ways to identify if something is wrong or not.

Once you analyze the shopping behavior of a customer, you’ll know exactly why this could be a potential fraud transaction.

But don’t worry; you won’t have to do it all yourself. There is plenty of software and customer management systems that could help you with that.

Bottom Line

Making sure the fraud counts are not over the top, this will help you maintain steady cash flow and allow you to focus on more productive parts of your business. Apart from the ones I’ve mentioned above, there are other solutions that could benefit you with chargebacks and fraud. For example, you can get chargeback insurance so that all the transactions made from unauthorized credit or debit cards are covered.

Remember, with the right solution in place, you can protect your business. All you need to do is look for the solutions and that’s why GlobalPay LTD is here.

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