Finding the Right Chargeback Prevention Strategy

Merchants walk a fine line with their chargeback fraud prevention strategy. Too strict and the false positive rate can do as much harm as chargeback fraud. Too lenient and the merchant is a target for savvy fraudsters. The solution lies in finding that perfect balance of technology, rule setting, and practicality.

For CNP merchants especially, the drive to find the ideal balance in fraud prevention is high priority. The recent news about high-profile security breaches has reinforced the degree to which customers are concerned with their data security.

Customers want assurances that merchants are using the latest in digital security technology to protect their data. This expectation encourages many merchants to use a heavy-handed approach. The better option is to use a multilayered fraud prevention strategy that uses the right technology at the right time.

A Multilayered Fraud Prevention Strategy

A reliable multilayered fraud prevention strategy uses a combination of technologies working together to detect and prevent fraud. Rather than just using 3D Secure or biometrics, multilayered fraud uses a customized combination of technologies to prevent chargeback fraud.

It’s important for merchants to understand that an out-of-the-box solution to chargeback fraud prevention is not enough to do the job. No two merchants have the same customer demographic, sales model, or infrastructure, making it impractical to use a plug-and-play fraud prevention strategy.

While most merchants don’t have the time to devote to becoming experts in fraud prevention strategies, it does help to gain some familiarity with the options available. Knowing the basics of fraud prevention allows merchants to answer customer questions—and ask the right questions of their payments solutions company.

• IP intelligence. Deep analysis of the IP Address used for the transaction to monitor possible risks associated with the location. Allows merchants to block transactions from fraudulent IP addresses.

• Device fingerprinting. Uses device information and reputation scoring to validate the transaction request. Provides additional protection against fraudsters who override cookies and other identifiers.

• Merchant Co-Op. Transactions are compared against a list of orders, looking for matches with fraudulent accounts. This technology can be customized to meet merchant needs.

• Address Verification Service (AVS). Verifies the address connected to the cardholder using a comparison look-up. Does not compare the entire address, making it possible for fraudsters to beat this strategy.

• 3D Secure. Uses a three-domain model to validate credit and debit card purchases. A basic security feature that is best strengthened with other options.

• Tokenization. Account and card information is replaced with a token identifier. The token is created by a Token Service and then issued to customer devices by the Token Issuance process. This makes it impossible to for fraudsters to reverse engineer the token.

• Geolocation. The location of the cardholder and the customer are compared.

• SSL. Provides a secure encrypted communication between customer devices and payment solutions.

The key to these fraud prevention technologies is in knowing which options make sense for the merchant’s particular needs. This requires an understanding of who is buying and how these customers are buying. Acquiring this information provides you with a better understanding of your overall fraud risk and can be used as part of an end-to-end chargeback prevention solution.

Creating a Custom Chargeback Fraud Prevention Strategy

Employing every single kind of technology available can make things worse, often by preventing valid transactions from being approved. Customers get frustrated with a slow and heavy-handed payment approval process and give up on the purchase. The best application of multilayered fraud prevention takes the ideal mix of technology for the merchant and applies it at the right time.

Here are some discerning questions that merchants should ask about their fraud prevention strategy:

• Is it flexible?

• Can it adapt to changing threats and purchasing methods?

• How easy is it to update the solution?

• Does this approach grow with the business, technology, and customer base?

• How broad is the scope of fraud prevention?

• What level of human involvement is required?

Possessing this information allows merchants to work with their chargeback prevention experts to create a strategy that is unique, practical, and actionable.

Moving Forward with a Trusted Chargeback Fraud Prevention Strategy

Merchants are under a lot of pressure to meet customer demands to provide a dynamic, efficient, and simple payment solution. The best way to provide this for your customers is with an end-to-end solution that employs the appropriate, best-in-class technology to prevent, detect, and review purchase data.

Always know that you have fraud prevention options. Using a customized solution provides you with the protection you need to instill confidence in your customers. Our team of chargeback experts is available to help you move forward with your fraud prevention strategy. You are always welcome to ask us questions about fraud prevention technology.