Fraudulent

Preventing disputes of the "Fraudulent" type: Learn how it's done properly.

Digital payment processing not only opens up new opportunities for merchants and shoppers, but also for fraudsters. If they manage to obtain payment data from customers, this can lead to chargebacks and thus to disputes. In this article, you will find recommendations on how to prevent fraudulent activities.

The cases in the "fraudulent" category can be divided into two sub-categories: real fraud and "Friendly Fraud".

Real fraud

Recognizing fraud indicators

One of the most important points is the early detection of fraud indicators. To this end, either use appropriate early detection software or ensure that your employees receive good and regular training. This will significantly increase your chances of recognizing fraudulent transactions. Below, we have listed typical patterns that may indicate fraud.

Suspicious address details

• suspicious e-mail addresses (e.g. [e-mail])

• suspicious telephone numbers (e.g. number sequences such as [phone] or an area code from a completely different country to that of the address)

• inconsistencies in the customer data (e.g. different purchases with the same e-mail address but different address data)

• different addresses for invoice and delivery

• international delivery addresses or orders with foreign credit cards

• a shipping company as the delivery address

Suspicious messages

• Check orders where the content of the comment field looks suspicious or prefabricated by searching for it on Google or another search engine. If the content of the comment field also appears at various other retailers, this may indicate fraud.

Ordering behaviour

• an order that deviates greatly from the usual ordering behavior, such as:

  • unusually high total order value

  • unusually large number of items ordered

• several declined payments with different credit cards within a short period of time (may indicate a fraudster testing stolen card numbers)

Suspicious payment behaviour

• many payments made with:

  • the same card, but different delivery addresses

  • same card and same IP address

  • same delivery address, but multiple cards

  • the same name and e-mail address

  • the same or similar card numbers within a short period of time

Rejected payments do not have to be an indicator of fraud, but they can be. It is therefore advisable to regularly check rejected payments for suspicious patterns.

Special wishes

If a customer makes unusual requests regarding their order, this may also indicate fraud. The following customer requests are suspicious and should be checked more closely:

• splitting a large order into several partial payments with different cards

• charge a card for an amount greater than the required amount and request that the carrier or another third party be paid using a different payment method (overpayment fraud)

• request a chargeback outside the card network (e.g. by bank transfer or check) instead of using the card with which the purchase was made

• have a payment processed manually by a third party (fraudsters could use this method to ensure that the payment is made using a different IP address)

• change the delivery address after the order has been placed (fraudsters could use a valid address for the payment and then have the products delivered to a different address)

• have orders delivered with express delivery

• have orders delivered by a shipping company suggested by the customer

• have part of a larger donation refunded (fraudsters pay in CHF 1,000.00, for example, then get in touch and say they made a mistake and only wanted to donate CHF 100.00 and would like to have the difference transferred back to them)

Specific indicators for digital products

Fraudsters use stolen credit cards particularly frequently when ordering digital products. Check such orders for the following indicators, as they may point to fraud.

• A customer buys a digital product several times within a short period of time.

• Different customers make purchases with one and the same credit card or with very similar email addresses.

• A customer buys a conspicuously large number of products or pays conspicuously high amounts.

Recommendations

• Delay shipping of expensive orders by up to 48 hours.

• Delay shipping to unverified shipping addresses by up to 48 hours.

• Match verified postal codes with the postal code on the shipping company's label (some scammers provide a valid postal code but give incorrect street, city, canton or state information. Automated systems then automatically correct the zip code, replacing the verified zip code of the billing address with that of the fraudster).

• Find out about delivery addresses (destinations) with increased risk.

• Make a chargeback in the event of a conspicuously high donation from an unknown individual.

Friendly Fraud

Unlike criminal fraud, "Friendly Fraud" does not involve the use of stolen card data. Instead, payments are made by legitimate cardholders.

Especially in families, but also among friends or in companies, it can happen that an authorized user of a credit card account makes a purchase that the credit card holder does not know about. If the cardholder notices the purchase, the transaction is often contested. However, the dispute can also be made by one and the same person.

There are basically two types of "Friendly Fraud".

No intention

In these cases, for example, the child makes a purchase, the parents notice it and dispute the payment. A mistake has simply been made - with no malicious intent behind it.

Conscious fraud

With digital products in particular, such as online services and subscriptions, it sometimes happens that the purchase is made deliberately and not contested until much later. In this way, the customer can use the purchased service for weeks or months - free of charge if they win the dispute.

As such disputes are based on a subjective assertion by the cardholder, it is not easy to take action against them. However, there are very effective measures you can take.

Recommendations

• clearly visible returns policy

• high availability and excellent quality of customer service to resolve cases at an early stage without intent

• good empathy from support staff