An overview of tools that will reduce the number of chargebacks
How to avoid chargebacks.
Merchants who have exceeded the chargeback limit in the Visa and Mastercard chargeback monitoring system may face sanctions. For example, in accordance with Visa's chargeback management principles, if a merchant reaches a chargeback threshold, their acquirer will be notified in writing.
The first notification of exceeded chargebacks is a warning. If, within a certain period of time, the necessary measures have not been taken to return acceptable levels of return of payments - Visa will apply financial sanctions.
To avoid falling victim to multiple financial sanctions, merchants should avoid chargebacks. And it's best to do this before disputes arise.
Solutions to avoid chargebacks
Merchants should use the services of a trusted payment service provider (PSP) if they want to run their business smoothly.
In any case, whatever the payment service provider, it is in the merchant's best interest to start figuring it out on his own.
How does the fraud and chargeback prevention system work?
The basic principle is as follows - to keep a “score” (rating) of each client. For each action or exceeded limit, the client receives a "point". A team of specialists calculates the number of these "points" in order to find out how safe it is to sell a product / service to a particular client, or in other words, what is the likelihood that this client will request a chargeback.
The merchant and the PSP should define a set of parameters to avoid conflicts:
Limiting the number of transactions from one card
You can set a limit on the number of payment attempts per day using one card. There are also general limits on transactions with one credit card.
Email Restriction
The system is similar to the previous one. You can set a limit on the number of purchases from one card, but under different email addresses.
Customers who use different e-mails while paying with one card are more likely to engage in fraudulent activity than those who pay with one card linked to one e-mail.
IP address restrictions
Modern technology makes it possible to track the IP address of each user. Thus, the merchant can determine where the customer made the purchase from. Moreover, it is even possible to determine if this IP address is considered dangerous or blacklisted.
Sift Science or MaxMind recently introduced high-tech solutions to detect suspicious activity from IP addresses in real time.
Let's consider each of them in more detail.
MaxMind
This service uses real-time feedback from one of the traders as a warning signal to the rest of the traders on the network. Thus, notification of fraudulent activity is carried out, together with the assignment of the appropriate status to an unreliable client. This scheme allows you to protect other online merchants from fraudulent chargebacks.
MaxMind is a single automated platform with an intuitive and user-friendly management system. The merchant has access to all transactions. The service even provides the ability to check which transactions were canceled due to suspicion of fraud.
If necessary, a notification can even come to the client, informing that his transaction was canceled due to suspicion of fraud, or the system will send a notification about an error in the processing of the transaction.
Most useful features of MaxMind:
Sift Science
Unlike MaxMind's approach, which is based on a scoring system for assessing customer reliability and the collaboration of all merchants within the network, Sift Science is a real-time machine learning system.
The system collects information about what can be considered normal online shopper behavior, and then analyzes the collected data and, based on it, studies the behavior of all customers, recording non-standard cases.
Thanks to machine learning, Sift Science is an effective tool in the fight against fraud and avoidance of chargebacks.
In addition to all of the above, Visa states in one of its merchant guides that most chargebacks may be due to imperfect payment processing.
How to avoid chargebacks.
Merchants who have exceeded the chargeback limit in the Visa and Mastercard chargeback monitoring system may face sanctions. For example, in accordance with Visa's chargeback management principles, if a merchant reaches a chargeback threshold, their acquirer will be notified in writing.
The first notification of exceeded chargebacks is a warning. If, within a certain period of time, the necessary measures have not been taken to return acceptable levels of return of payments - Visa will apply financial sanctions.
To avoid falling victim to multiple financial sanctions, merchants should avoid chargebacks. And it's best to do this before disputes arise.
Solutions to avoid chargebacks
Merchants should use the services of a trusted payment service provider (PSP) if they want to run their business smoothly.
In any case, whatever the payment service provider, it is in the merchant's best interest to start figuring it out on his own.
How does the fraud and chargeback prevention system work?
The basic principle is as follows - to keep a “score” (rating) of each client. For each action or exceeded limit, the client receives a "point". A team of specialists calculates the number of these "points" in order to find out how safe it is to sell a product / service to a particular client, or in other words, what is the likelihood that this client will request a chargeback.
The merchant and the PSP should define a set of parameters to avoid conflicts:
Limiting the number of transactions from one cardYou can set a limit on the number of payment attempts per day using one card. There are also general limits on transactions with one credit card.
Email RestrictionThe system is similar to the previous one. You can set a limit on the number of purchases from one card, but under different email addresses.
Customers who use different e-mails while paying with one card are more likely to engage in fraudulent activity than those who pay with one card linked to one e-mail.
IP address restrictionsModern technology makes it possible to track the IP address of each user. Thus, the merchant can determine where the customer made the purchase from. Moreover, it is even possible to determine if this IP address is considered dangerous or blacklisted.
Sift Science or MaxMind recently introduced high-tech solutions to detect suspicious activity from IP addresses in real time.
Let's consider each of them in more detail.
MaxMind
This service uses real-time feedback from one of the traders as a warning signal to the rest of the traders on the network. Thus, notification of fraudulent activity is carried out, together with the assignment of the appropriate status to an unreliable client. This scheme allows you to protect other online merchants from fraudulent chargebacks.
MaxMind is a single automated platform with an intuitive and user-friendly management system. The merchant has access to all transactions. The service even provides the ability to check which transactions were canceled due to suspicion of fraud.
If necessary, a notification can even come to the client, informing that his transaction was canceled due to suspicion of fraud, or the system will send a notification about an error in the processing of the transaction.
Most useful features of MaxMind:
- Comparison of IBAN with the country from which the payment originates
- Email verification
- RiskScore (score for the likelihood of fraud)
- Checking IP Addresses
- Identifying proxy servers
Sift Science
Unlike MaxMind's approach, which is based on a scoring system for assessing customer reliability and the collaboration of all merchants within the network, Sift Science is a real-time machine learning system.
The system collects information about what can be considered normal online shopper behavior, and then analyzes the collected data and, based on it, studies the behavior of all customers, recording non-standard cases.
Thanks to machine learning, Sift Science is an effective tool in the fight against fraud and avoidance of chargebacks.
In addition to all of the above, Visa states in one of its merchant guides that most chargebacks may be due to imperfect payment processing.
