Report: How Card Issuers Sort Fact From Fiction In Customer Chargeback Claims

Card-not-present (CNP) transactions are rising as consumers lean heavily on digital channels to meet their needs during the ongoing pandemic.

Fraudsters are eager to steal consumer card details and use them online, however, slipping their own criminal purchases in among the influx of legitimate digital transactions. Financial institutions (FIs) therefore offer cardholders a critical safeguard: the ability to file chargebacks so they can get their money refunded to them for purchases that they did not make.

Not all shoppers are honest or attentive, though, and may file chargebacks on transactions they genuinely made. This is often due to customers simply forgetting about the order or not recognizing the way it appears on their billing statements, although some customers do maliciously make chargeback claims in an effort to get goods for free.

FIs need to thoroughly investigate all chargeback claims so they can protect merchants from such “friendly fraud” while also safeguarding honest consumers from criminal fraud. The September FI Fraud Decisioning Playbook examines the scope of these issues and how credit unions (CUs) and banks are strategizing to accurately and cost-effectively identify wrongful chargebacks.

Around The FI Fraud Decisioning World

Friendly fraud is painful — and common. A recent study examining the past three years found that online retailers experienced wrongful chargebacks 50 percent more often than they did chargebacks that were in response to criminal activity. This is a costly problem for merchants that often struggle to furnish the evidence needed to successfully dispute the claims and for FIs that must spend time and money investigating charges that never should have been placed.

FIs that help dispel customers’ confusions over their billing statements can help reduce friendly fraud. Consumers are likely to file chargebacks if they do not realize family members made the purchases or if they fail to recognize the billers’ name, for example. A recent survey found that many consumers would like to be able to see more details — such as receipt images — when viewing their purchasing histories online, which could help them identify and confirm the transactions.

Some FIs are also using artificial intelligence (AI) solutions to help them gather and analyze data to assess the legitimacy of chargeback claims. Leveraging these kinds of advanced tools can help FIs more quickly get the information needed to come to conclusions and also save their staff time.

To find more about these and the rest of the latest headlines, download the Playbook.

How Card Issuers Thwart The Friendly Fraudsters

FIs need to discover whether chargebacks are warranted or not, and the right strategy can be paramount. Quick communications with customers and merchants as well as robust data analytics are key, according to Mohamad Tayba, senior manager of fraud at Alliant Credit Union.

In this month’s Feature Story, Tayba discusses using detailed customer purchasing profiles and device and behavioral analysis to get to the truth.

Read the full story in the Playbook.

Deep Dive: Using AI To Filter Out Friendly Fraudsters

Banks and CUs spend time and money evaluating undue chargeback claims, and consumers’ rising use of CNP transactions during the pandemic are likely to only increase frequency of such unwarranted filings. FIs have tools and strategies available to help them respond and lessen this issue, however.

This month’s Deep Dive examines the scope of the friendly fraud problem and what FIs are doing to reduce it.

Get the scoop in the Playbook.

About The Playbook

The FI Fraud Decisioning Playbook, a PYMNTS and Simility, a PayPal service, collaboration, examines what it takes to get to the bottom of chargeback claims and deter friendly fraud.