Chargeback protection: information and the power it can bring
The numbers are simply unbelievable. The sheer volume of fraud and the resulting expenses are mind-boggling. Part of that unbelief stems from how many criminally minded individuals actually exist in the world today. The other part of that unbelief comes from the fact that so many merchants still haven't found a reliable and workable solution to these problems.
How big is this problem? Look at a few reports that cited some illuminating statistics:
- One story from a couple of years ago then reported that nearly 86% of chargebacks were of a fraudulent nature. That number may be a little high or perhaps companies defending against fraudulent activity have gotten better?
- Maybe they haven't - more recently, the Federal Reserve Bank of Kansas City published a paper that stated, "About 70 to 80 percent of chargebacks are resolved as merchant liability."
- That same paper also said, "The most common chargeback reason is fraud, which accounts for about 50 percent of the total chargebacks." Just to be clear, this isn't a new issue either, as the following statistic reveals.
- This story cited that during 2004 fraud cost US e-commerce merchants more than 2.6 billion dollars. That was in 2004.
Evidently this is not a new problem and apparently there are still many merchants dealing with this costly headache. Of course, the primary issue lies with those who have ill intentions and choose to steal. Yet on some level merchants, banks and owners have to take some accountability in combating this known threat. That issue wasn't addressed in any form of a solution until recently.
The Initial Problem
For far too long chargebacks were a crime that victims were reactive to, not proactive against. It was only after the claim was filed, the banks processed it and the merchants had to deal with it, that any effort was made to make this right. Some efforts were made to limit customer liability amounts and those even more serious about helping waived all customer liability for proven fraudulence.
At ClearSale we understand the importance of information and the power it can bring. Our mass volume customers like Walmart trust us, industry specific merchants such as Staples use us. Even specialty and niche merchants like Chanel have taken advantage of our system. And we trust the detail and information from diferent data sources to help us continue to shape and empower our security for our clients.
It sounds simple, stopping the problem before it starts, but it took ingenuity, expertise and the right plan to make it happen.
Chargebacks Have Been Poorly Handled
One major issue in dealing with chargebacks was how they were being handled. That problem still persists today as it can often seem like any irregularity can trigger a declined transaction. That is partly because of technology and partly because of a lack of commitment.
Older archaic computer defense systems would either fail to catch an issue or instantly respond to potentially fraudulent or unusual activity by declining the transaction. As months and years passed and as technology improved, it became obvious that many of these declined transactions were in error. Failing to process transactions that were flagged because of nearly every and any glitch was quickly realized as a costly mistake. These attempts to thwart fraud has and continues to cost merchants revenue that is being unnecessarily lost.
Many people have been looking to AI (artificial intelligence) systems for a solution. The truth is that AI has come a long way. It can intelligently recognize changes in patterns and unusual activity for instance, but AI is not quite human yet. When it comes to security and protection there is still no replacement for human beings and human eyes.
That requires that companies who are charged with safeguarding your business from fraudulent actions and threats be willing to commit to the manpower necessary to deliver.
Technology has Raised the Bar
Technology has been wonderful in that it has equipped companies with more security options, features and tools. It has also opened an entirely new world for the "cyber-criminal" which has raised the bar for security and fraud defense.
Even many IT security professionals have expressed concern over the state of their security measures and systems. An article covering this very topic revealed that less than 15 percent of security personnel expressed confidence in their current ability to defend and recognize attacks.
Web fraud detection, response and handling is a serious issue and one that demands absolute confidence in the security systems being utilized. Is it even possible to assure your customers of their financial safety if you can't be confident in the systems you are using to offer that assurance? Of course not.
Evaluating and analyzing the transactions across the web today require the right tools. We bring the automation and efficiency of technology and AI combined with the intellect and insight of our professional team to deliver solutions. Not only is this the most effective system available but it has been tested and proven.
The answer to stopping crime is getting there before it happens. The internet has given crime a new avenue into the wallets of customers, companies and financial institutions. This doesn't mean shutting down that road and preventing merchants from making money, it means being smarter, proactive and using every resource available to protect that avenue.
Statics, surveys and reports all declare that the problem isn't going away. The only answer is to use a security system that works. The good news is - there is a solution.