False positives – what are they?
A false positive occurs when a retailer receives an alert from their chargeback service when no dispute actually exists.
False positives are caused by incorrect data, bad timing and is most typically caused by a fraud alert system using aging or faulty data. Open-loop chargeback services pull a large amount of data from TC40 files and other similar sources, which are not only dated, they include first-time fraud offenders. TC40 files include raw data for all transactions identified as fraudulent and are not intended to be used for chargeback prevention. Fraud prevention services that base many of their alerts on this data deliver more false positives by alerting a dispute than might not have existed or has been resolved.
Without direct integration with top issuers, open-loop services deliver alerts to retailers after TC40 data is passed between the issuers, card brands and acquirers. The pace of data transmission between the parties, might cause alerts to be triggered and sent to the merchant before the dispute actually becomes a chargeback. Fraud data may also be included for transaction dates outside of the timeframe for chargeback management, triggering false positives.