Catch me if you can, part II: how to handle card schemes and chargebacks

Modern-day organized gangs are able to strike within the short time it takes for a credit card transaction to clear. Especially in industries with high demand, fraud is inevitable. Yet, for many merchants, fraud is often an afterthought. That is, until a major attack has taken place.

What can merchants do?

Keep an eye on card scheme thresholds

Next to keeping an eye on fraud losses, a merchant should also be aware of the thresholds maintained by card scheme programmes. Merchants are generally informed by the PSP or acquirer of rising fraud incidents. However, the information may not always arrive on time. In some cases, this delay in reporting can lead to fines by card schemes. Even though thresholds are not that easily broken, merchants should be aware not to get too close to these thresholds.

To be able to control the situation, many merchants will turn towards the acquirer or PSP. However, PSPs and acquirers don’t always have the time or opportunity to properly help the merchant in these matters. This is when outside help can be most beneficial.

As an independent organisation (not linked to any PSP or acquirer), Alphacomm Solutions can provide fresh perspectives and help the merchant get a fraud department organised.

Better handling of chargebacks

If a cardholder does not recognize the transaction on his / her card statement, a cardholder can proceed with a chargeback. Unfortunately for merchants, many cardholders will not contact the merchant first to solve the situation. Chargebacks are a real pain and can be quite costly. Not only does the merchant need to pay back the transaction, but the PSP or acquirer might also require a chargeback handling fee. Nevertheless, the advice is to always challenge and fight your chargeback. You would be surprised how many cases you will win.

However, if you have reasonably low chargeback numbers, you could opt to work with a partner that provides payment guarantees, e.g. a fraud prevention provider.

The provider screens your transactions for fraud and when a transaction is accepted but charged back afterwards, the transaction is reimbursed. Some fraud prevention providers will even the reimburse the chargeback admin costs. This could be a real cost saving service. Furthermore, some companies offer no cure no pay, which means if the fraud system declines, the transaction will not be invoiced.

Alphacomm Solutions provides the above-mentioned service, including all the positives (no cure no pay and redeeming of the chargeback admin costs from the acquirer or PSP).

How about alternatives?

Another option you have to combat fraud is to move over to alternative payment methods. There are payment methods that are 100% risk-free for the merchant because the risk lies totally with the account holder (or bank). It does not mean that you can sit back and relax, because even these payments will have fraud and in the chain of obligations you should report fraud to the particular bank. One example of a 100% risk-free payment method is the iDeal system used in the Netherlands.

Another positive point of alternatives is that you’re are able to implement the most popular payment methods in the country of your customers. In other words their favourite way of payment. This brings you the best of both worlds, less fraud and a happy customer because they can pay in the way they really want.

 

Danny Stotijn
Fraud / Risk Manager & Sales consultant


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