Understanding and Preventing Credit Card Chargebacks.

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Posted by Maddy Moyer - 11 August, 2016


Every retailer has experienced shoplifting. While the impact of shoplifting has remained constant, the techniques in which these thieves masquerade as customers to walk off with merchandise has changed. Today, credit cards have become a prime channel for shoplifters to walk out with merchandise without truly paying for it and retailers have no way of identifying in real time which customers will be committing the crime.  Let’s consider the credit card chargeback tactic.

How does a chargeback really work?

A credit card chargeback is simple. If someone is looking at their credit card statement, and notices charges that they did not complete, they report the charges to the bank that issued the credit card. The bank then refunds the customer and debits the retailer for the disputed charge, as well as a processing fee that can typically range from $15 to $100. It then becomes the responsibility of the retailer to investigate the validity of the disputed charges.

Credit card chargebacks could be valid if:

  • A third party fraudulently made the purchase using the customer’s credit card
  • The item was not received by the customer
  • The customer was billed incorrectly for the item
  • The product was severely inferior to the customer’s expectations or damaged in transit

Applying a slightly different twist on this practice, many shoplifters today will make the purchases themselves, receive the merchandise and then dispute the charges, aiming to get the product free of charge. As a retailer, identifying these fraudulent customers in the store is an impossible task. These people look and behave like normal customers. Even at the register, they swipe their credit card and sign the receipt if necessary. But, as soon as they are safely out of the store with the merchandise, they notify their bank that someone has stolen their credit card and thus the chargeback process begins.

What can you do as a retailer?

Since last October, the responsibility of fraud shifted to retailers putting the burden on many to keep a closer eye on the validity of all credit card chargeback claims. Now, more than ever, having a data analytics tool that gives you full visibility into retail transactions is crucial. Customers are not obligated to let the retailer know that they have filed a chargeback claim. Once the retailer is notified, the clock starts ticking – the longer the investigation process, the costlier. Chargeback fees can add up, but just paying off each chargeback is simply not the answer.

Agilence has the solution that makes identifying and flagging credit card chargeback issues a breeze. With our 20/20 Data analytics platform, accounting departments can easily identify the anomalies – the causes of chargebacks that aren’t valid like manually keyed credit cards. With our convenient information boxes, investigators are presented with the full, comprehensive overview of each transaction including customer information.

For example, let’s say a customer claims that the charge should be reversed because they have never been to that store and the purchase must have been completed by a third party using their credit card. You can quickly recall the customer’s history and find every transaction they have ever completed with your business by location and shut down fraudulent claims.

Additionally, if a customer requests a chargeback, claiming they never received the product they ordered, this claim can be easily validated. 20/20’s integration of shipping manifests allows for easy recall of package and shipping information in order to confirm if the product reached its destination. Furthermore, with our convenient information boxes, all relevant customer data is in one location. Here, you could see that the customer in question has previously made several returns to your store. To add another level of complexity, consider that the transaction of the product purchased, the one they are claiming was not delivered, has exceeded your time frame for a return according to store policy. With no other options, this customer may be experiencing buyer’s remorse and fraudulently filing a chargeback claim in order to get their money back. It can happen even with repeat customers.

Not only does 20/20 identify transactions with high chargeback risks – such as manually keyed credit cards, but it will give you all of the information necessary to determine the validity of a formal claim.

Agilence has the solutions to help you reduce losses from fraud and theft while saving you valuable time and resources. Searching through every chargeback claim can be a tedious and time consuming job; 20/20 makes it easy. Through the 20/20 Data Analytics platform, you can monitor and receive alerts to identify fraudulent chargeback claims. Our 20/20 suite for retail and restaurants provides an all-in-one overview of every transaction, making every user a power user.

Topics: Blog

Posted by Maddy Moyer

Maddy Moyer has been a Sales and Marketing Associate at Agilence, Inc. since 2015. She has done widespread research into the top behaviors associated with loss prevention in both the restaurant and retail industry. Maddy is also a commercial model and actress in Philadelphia and New York City, frequently appearing on QVC.


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