Friday, January 27, 2023
Monica Eaton, founder of Chargebacks911 and Fi911, saw fraud explode during the pandemic, when consumers and merchants shifted to ecommerce. She recently said the current climate shows no sign of slowing down. If anything, she noted, fraudsters are doubling down on activities as banks struggle to stay a step ahead, in many cases overreacting to customer disputes. "The fraud explosion during the pandemic hurts banks, merchants and customers," Eaton said. "Now banks are over-correcting, and the result is harming vendors who aren't getting paid for valid sales. The dispute process for those merchants is challenging, with no guarantee of success."
Even in the pandemic's aftermath, ecommerce transactions continue to spike, noted the CNBC Technology Executive Council, which observed online banking and credit card fraud rising to historic levels. However, a Dec. 6, 2022 post, titled, "Bank card fraud exploded during the pandemic. Then came the bot hiring boom," offered a ray of hope to merchants and payment processors. Researchers found advanced technologies empower merchants to scrutinize disputes and challenge all types of fraud, including small-dollar chargebacks.
"Low-dollar chargebacks ranging from $50 to $100 can now proceed through a back-end process employing 'digital workers' and existing business logic to connect with the payment processor and get a claim reimbursed to a customer," CNBC researchers wrote. "Bots also can be scaled up and down. In this case, as the cases of fraud rose, rather than trying to train employees to be able to handle a high volume process, a digital workforce could be scaled up immediately."
Suresh Dakshina, president and co-founder of Chargeback Gurus, has seen rising levels of first-party fraud, also known as friendly fraud. He noted these disputes are particularly challenging for merchants tasked with differentiating between good and fraudulent customers.
"The people who are committing fraud are frequently a merchant's own customers," he said. "Friendly fraud has long been a challenge for ecommerce and retail merchants, and we have seen upwards of 70 percent of chargebacks caused by first-party misuse."
Dakshina recommended using predictive analytics to stop friendly fraud before a customer initiates a dispute or inquiry. Citing a recent study by Fraud.net, which found merchants lost $4.8 billion to first-party fraud in 2020, he urged service providers to help merchants maintain healthy chargeback ratios by using advanced technologies to predict and mitigate chargebacks.
Chargeback Gurus recently launched Ari, which Dakshina described as a predictive engine that flags high-risk transactions before fulfillment and identifies transactions most likely to become chargebacks. By diverting high-risk customers to alternative payment methods, the solution helps merchants reduce risk without losing revenue, he added.
Eaton, whose companies provide a range of fraud fighting solutions, agreed advanced technologies are a merchant's best defense against escalating fraud. She advised merchants to research approaches to fraud prevention and look for technology platforms that deliver end-to-end chargeback prevention and remediation. 
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