Friendly fraud is the new “rubber check” because most issuing banks have a rubber stamp policy on chargebacks. Though the circumstances may vary, if a customer calls the number on the back of their card and asks for a chargeback, they’re going to get one. The transaction is six months old… doesn’t matter: chargeback. The customer did not contact the merchant… oh well, here you go: chargeback. The customer got what they paid for… yep: chargeback.
Merchants should be proactive and safeguard every transaction as a potential chargeback. That might seem like a pain, but there is a silver lining to this challenge. The measures you take serve more than just the cynical purpose of fighting fraud. You can also leverage your anti-fraud safeguards to boost your bottom line.
Fulfillment is the process of delivering goods or services sold. With tangible goods, a merchant can keep a proof of delivery to show an order was fulfilled. But many high-risk merchants deliver digital goods like subscriptions and paid access. For these merchants, proof of delivery is ongoing as users navigate member sites, play games, or access exclusive services online. This ongoing activity should be tracked diligently.
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When merchants like these choose to fight a chargeback, the “proof of delivery” we invariable need are the login logs. “Login logs are one of the most important data we need in representment, and unfortunately a lot of merchants don’t keep these,” says ChargebackHelp founder Raja Roy-Choudhury. These logs carry important information such as user IP address, time on server, and user paths that can be matched with data obtained at the point of sale.
Another set of fulfillment data that is often overlooked is customer service correspondence: emails, texts, phone calls from a customer. For large purchases, you may want extend a courtesy call to that customer. These correspondences should be stored along with the respective email address, IP or phone number provided at the point of sale. Presented to the banks in friendly fraud disputes, these logs can prove a customer actively consumed the product or service they are trying to get a refund for.
Don’t just keep this information on some forgotten drive to just hand off. Structure this data in a way that you and your team can also make sense of. User logs go beyond mere traffic analytics to identify individual user interactions. You can identify your power users, your big spenders, your “whales.” Their correspondences can help tailor your brand to their preferences, and identify what you can do to develop more whales.
This information also provides essential context to a friendly fraud dispute. You’ll know better when to issue refunds and when to fight chargebacks. If an engaged customer has a dispute, you will have the opportunity to recover your losses over time. Internetretailer.com puts it like this: “Revenue lost to true fraud is sunk, revenue lost to friendly fraud is recoverable.” Comprehensive transaction data will help you know the difference.
The burden of proof rests heavily on the merchant; issuing banks side overwhelmingly with the cardholder against fraud. But this isn’t necessarily a bad thing if you harvest that proof proactively. If you can utilize the data for your own business purposes, chances are the banks will see your side of an argument better from it too. Think of it like taxes; we all hate doing them, but in the end, we see where our money goes each year, which gives us insights that we can profit from.
