What are card chargebacks & fraud?

Chargebacks may occur from genuine disputes like goods not received or goods not as described. But they can also be fraudulent, where a criminal will intentionally take advantage of your business. A chargeback of any sort may result in your business not getting paid—even if you’ve already provided the goods or services relating to the transaction. 

Some common reasons for chargebacks are:

  • If a cardholder can’t identify the transaction
  • Disputes between a purchaser and merchant
  • Fraudulent transactions

How can my business avoid card chargebacks?

There are a few simple things you can do to help prepare your business against the risks of chargebacks, both genuine and fraudulent.

1. Update your business name and product/service descriptions

If a cardholder can’t identify a transaction on their statement, they can easily dispute it and claim it was fraudulent or invalid. By keeping your business’ information and product descriptions accurate and clear, it can help shoppers recognise a purchase made with your business.

2. Have clear shipping policies

Delivery delays are usually out of your control, especially during the busiest shopping period of the year. Make sure you clearly communicate how and when your business ships products to set expectations and limit potential disputes if something doesn’t arrive on time.

3. Clearly state final or total costs

It’s important to include all charges and fees, like tax or service fees, in the final price for customers. Make sure customers are fully aware of what they will be charged so there’s no confusion around the final cost that appears on their statement.

4. Have clear refund policies

It can be less costly (and stressful) to offer a refund than being involved in a chargeback case. With clear steps around how and why a customer may request a refund, you can help limit the need for purchasers to jump straight to a chargeback dispute.

5. Be vigilant with large or high-value orders

Purchases for orders larger than normal might suggest fraud, especially for products that are easy to resell or if the order is made by an unknown customer. You likely know who your big customers are or will have contact with a new customer if they’re planning on spending a lot. If you notice someone buying lots of the same item, in either one or multiple transactions, consider reaching out to confirm the order before proceeding. 

6. Reduce risks with card-not-present transactions

Card-not-present transactions (where you manually enter card details to your EFTPOS machine) leave your business financially liable if they turn out to be fraudulent. You should never hand the terminal to the customer to key in transactions. To avoid the need for taking payments manually, consider setting up a secure alternative, like through an online payment gateway, where customers can pay for your goods or services.

7. Use fraud management tools

Where possible, use your gateway’s inbuilt fraud tools such as country code blocking, IP whitelisting, blacklisting and velocity checks. These are easy and cost-effective tools for authenticating a cardholder at the point of purchase. You should also use Mastercard Identity Check or Visa Secure to authenticate transactions when you can.

How can my business spot card fraud before it happens?

You and your team are integral to the protection of your business and customers against fraudulent activity and should be aware of the telltale signs of potential card fraud, including EFTPOS fraud. Make sure you provide education on merchant fraud, and keep an eye out for things like:

  • Customers only interested in delivery times, not the details or cost of a product or service
  • If someone is unsure about their personal information
  • If one customer makes multiple transactions on several cards 
  • Multiple transactions on a single card in a short time