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Chargeback fraud prevention and your business | GoCardless Skip to content
Chargeback fraud prevention and your business
Written by GoCardless The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless.
The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each.
The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio Last editedJan 2023 — 2 min read
What is chargeback fraud? Chargeback fraud protection If you’re a merchant operating in the 21st century, an online retail presence is pretty much obligatory. It offers opportunities to trade all over the globe, meeting the growing consumer demand for e-commerce which is quick, simple and secure. GoCardless can play a huge role in helping any merchant tap into these opportunities, increasing cash flow , income and customer
satisfaction. The more you trade, the more you have to learn to instigate chargeback fraud prevention measures.
What is chargeback fraud? Chargeback fraud is sometimes referred to as “friendly fraud,” but there’s really nothing friendly about it. Chargebacks were initially introduced in order to provide reassurance and extra security for customers paying with a credit or debit card. It is a mechanism which reverses the card payment, and can legitimately be used in the following circumstances:
Chargeback fraud occurs in those cases when a customer has received the goods in question and keeps them, but then makes a claim on the basis outlined above. The claim is made to the issuing bank which does, in most cases, automatically issue the funds, then process the dispute with the merchant. It should be noted that some chargeback fraud can be accidental, if a customer doesn’t remember making an actual payment, or if another member of the family such as a child used their payment card without permission.
When chargeback fraud occurs, a processing fee of between $12 and $25 is charged by the card issuer, on top of the refunded amount and the loss of the original stock. Clearly, this is going to have a huge impact on any merchant, and even worse is the fact that schemes such as Visa and Mastercard place merchants with a high percentage of chargeback transactions (0.65% and 1% of transactions respectively) onto a special program. Under this program, they will be charged fines and fees every month, until the ratio of chargebacks is lower.
Chargeback fraud protection It’s clearly in the interests of any merchant accepting card payments online to have robust chargeback fraud protection measures in place. These measures can include the following:
Partnering with a payment platform such as GoCardless means being able to offer the widest possible range of payment options, from direct bank transfers to ACH Debit solutions. Not only
do ACH Debit payments decrease the incidence of chargeback fraud, they also result – according to a survey carried out by IDC – in merchants getting paid 47% faster.
We can help GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments .
Over 100,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.
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Try a better way to collect payments
Try a better way to collect payments