As card-not-present fraud migrates due to the transition of Chip & Pin payments, we see fraud levels rising in the US. At the same time, as online merchants choose to expand internationally they face increasingly high levels of fraud in their cross-border transactions. So one of the biggest challenges CNP merchants active in international eCommerce environment are facing is the steady rise of “friendly fraud”, also known as “It wasn’t me” chargeback.
“It becomes more of an imperative for companies to have a strategic response” says David Birch.
There is a tension between merchants, processors and card schemes over what direction to follow. Merchants are clearly very unhappy about the level of fraud and chargebacks, even if they call it “friendly”. Even with the new VISA regulations, online merchants feel they are involved in too much work and extra costs on their part. Many of these issues are based mainly on the fact that people are still using magnetic stripes and other outdated and insecure payment methods.
According to Dave Birch, the level of fraud was previously regarded as being tolerable in the US, but now the increasing incidence of fraud and chargeback cases is triggering change in the international eCommerce arena. There is an imperative for change supported by the new technological possibilities that can make a real difference. For instance, as retailers gain more control over the Payment Processing Point of Sale, they have their own app, and they can identify the phones, location and so on, which makes payment more secure than using stripes, signatures and the like.
The issue of fraud and chargeback is a very special part of the international payments world, costing companies millions. Online merchants need to understand the difference between friendly fraud and real criminal fraud, its roots and how to respond to these cases. Social media has given online merchants great support in fighting friendly fraud, and it can be used to uncover it if a customer tries to get a chargeback after a legitimate transaction (e.g. tickets to a concert, clothing items etc.). But there is still plenty of room for discussions and collaboration between merchants, card schemes and the payments providers, to ensure a secure risk management approach to fraud in the international eCommerce space.