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Table of Contents

Lead Story

Non-payment mobile options popular this holiday season

Patti Murphy

News

Industry Update

Holiday season brings tidings of CNP fraud

Tripwire, Verizon advocate cyber-readiness

California vote bumps pot toward legitimatization

Vantiv growth plans to include Moneris USA

Features

2016 ISV study

Smartphone ecommerce on the rise

Daria Rippingale

Views

Payments are live

Dale S. Laszig
DSL Direct LLC

Biometrics hot at Money20/20

Peggy Bekavac Olson
Strategic Marketing

Education

Street SmartsSM:
Sales as a healing profession

John Tucker
1st Capital Loans LLC

Gateways rising

Adam Atlas
Attorney at Law

The friendly fraudster: Your merchants' worst frenemy

Evi Triantafyllides
PAAY LLC

Expand your time

Steven Feldshuh
Merchants' Choice Solution East

Company Profile

Digitzs Solutions Inc.

New Products

Personalized, mobile, in-store shopping

Contextual Commerce Platform
OmnyPay Inc.

EMV-certified reader for smartphones, tablets, PCs

Walker C2X
AnywhereCommerce

Inspiration

Boundless creativity

Departments

Letter from the editors

Readers Speak

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

November 28, 2016  •  Issue 16:11:02

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The friendly fraudster: Your merchants' worst frenemy

By Evi Triantafyllides

Here's a universally recognized and established fact (at least, in a processor's universe): fraud is one of the most infuriating and costly nightmares for merchants and their processors. And the online world is especially hard hit – at a rate that is accelerating and expected to rise.

With Statista predicting online fraud will reach the $3.8 billion range by the end of 2016, with a further spike that will cost merchants a staggering $6.4 billion by 2018, a corresponding increase in demand for fraud filters and fraud protection and prevention tools comes as no surprise. And while stakeholders are resorting more and more to these tools, one of the most important aspects of fraud that keeps merchants tight handed, and with limited options for precautions, is none other than friendly fraud. Those who have experienced it know that friendly fraudsters are the worst kind of friends (or, in search of a better word, customers), as they can flip flop from contributors toward merchants' profits to enemies of already drained budgets. Who are these people? Let me introduce your classic cases.

The revengeful one

This type shows no mercy. A delay in shipping; frustration with the customer care team or a strict return policy; or a product that was ill-described, did not live up to expectations, or was advertised as able to help you fly to the moon when, in fact, it could not: these are some common reasons that will cause a revengeful customer to retaliate and initiate a chargeback.

This type of user is often found among merchants with no or strict return policies – with the travel and furniture industries being popular candidates – or, in a broader context, any overpromising and overambitious merchant.

The forgetful one

We've all been a forgetful user, at least once in our lives: that one subscription we forgot to cancel after the first month, or that free trial that ended before we cancelled our plan. And even though for some of us a cringe will suffice to show our frustration, others will take the extra step of disputing the service's charge.

This type of user is often found among subscription-based stores or services that offer a free trial period.

The lazy one

We might be given the option to return an item, but then again, how many times were we too bored or busy to do so? Wrong sized shoes, a shirt for which we later found a better alternative and that painting we have no idea why we bought. Any of these, invariably, end up in the "to give" pile, as consumers are either too lazy to return them, or the return terms are too complex for them to bother. And so it goes: if they won't use the items, then they feel less guilty about picking up the phone and disputing these charges.

This type of user is often found among high-ticket items and lifestyle goods such as fashion items.

The cheeky one

And sometimes, you just have users who are all too familiar with the chargeback process. So, naturally, they decide to capitalize on it (that is, lie that they never received the item – for no good reason other than to save money that is not rightfully theirs).

This type of user is often found anywhere, so beware.

Turning fraudsters into issuers' frenemies

Since fraud filters and prevention tools are designed to identify suspicious cardholder behavior, and since there's nothing suspicious about a fraudster who's using his or her own card and identity, mitigating friendly fraud is the trickiest of them all. Having said that, it is not an entirely lost cause.

Even though traditional fraud prevention devices can't do much, implementing tools that shift liability of fraud away from e-tailers, instead of trying to detect the undetectable, is a processor's and merchant's best remedy. This type of fraud protection can be found in 3-D Secure, a card-brand backed program that, similar to EMV (Europay, Mastercard and Visa) in the offline space, "rewards" merchants who authenticate consumers' identities by qualifying transactions at better rates and shifting liability in the case of fraud to card issuers.

The proposition is simple. Follow the rules the major card brands (Visa, Mastercard and American Express) created, run transaction details through their authentication systems, and if a transaction is verified, even if it is not legit (or, in the case of friendly fraud, the consumer claims that it is not legit), it's not your problem to pay anymore.

And the proposition has become even more appealing. In the past, 3-D Secure's adoption was a hard case to make, as authentication required input by the consumer, increasing cart abandonment. However, the card networks decided to be kind and do the heavy thinking themselves. They now authenticate transactions by running consumers' previous card data and purchasing patterns through their systems, making the fight against friendly fraud an easily accomplished task.

Evi Triantafyllides is the Marketing Director at PAAY, a software solution that qualifies e-commerce transactions at lower interchange rates and shifts liability for e-commerce fraud away from merchants, to the card issuers. Evi was the first full-time employee at PAAY. She is responsible for the company's marketing, and at the same time focuses on ISO relations and partnerships. Find out about PAAY at www.paay.co or reach out to her directly at evi@paay.co.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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