By Melody Lashmar There are many things affecting an online merchant’s ability to stay afloat in the competitive Internet marketplace. A downturn in the economy, business rivals with a similar product on the market and dwindling consumer confidence can all take a toll on your profits. In addition to these factors is the very real threat of e-commerce fraud, one of which is deceptive chargebacks.
One example of a chargeback situation that had devastating consequences is a travel company that recently closed its doors. Several customers who paid for their tickets online by credit card then turned around and contacted their card issuers to initiate a chargeback because they weren’t able to take the trip they paid for. If you think you wouldn’t be held liable for this type of chargeback, think again. If the transaction is charged back for any reason, including fraud, the merchant has to pay for the chargeback. Even if the situation is resolved in the seller’s favor, and they’re able to recoup the cost of the stolen merchandise or services, chargeback fees can add up.
It isn’t just veteran scam artists who are engaging in e-commerce fraud. Hard economic times might cause the average customer to “steal” products from an online retailer by saying he or she never received the product that was ordered. For example, a well-meaning consumer may have made a large online purchase for a flat screen television, but then found himself out of work the next day, so he may claim the television was never received. These types of scenarios can be frustrating for hard-working merchants who are trying to develop a loyal customer base and boost their bottom line.
In the ever-evolving world of online fraud, there are very strict time frames that are imposed on a merchant to contest a chargeback. If the merchant does not reply in the required time period, the chargeback cannot be contested and the merchant has to pay the chargeback regardless of whether a merchant has proof that the merchandise was delivered. This translates to emboldened consumers who make “friendly” chargebacks, believing they have little to risk. In some cases, card issuers are not aggressive in pursuing their customers for fraud.
As a business owner, you need to be proactive about chargeback abuse to stop scam artists in their tracks. One way to be diligent is by analyzing sales records. This can help you identify customers who charge back items on a regular basis and give you the opportunity to decide whether you want to continue doing business with them. Also, there is information available online that helps you determine which zip codes are notorious for online theft, so you can remain on high alert when a buyer asks you to ship to that area.
