Limiting Chargebacks by understanding data trends

All online retailers recognize that chargebacks are a regular and growth hindering issue. These chargebacks not only outlay the refund and the worth of the goods, but also include the pesky bank processing fees. Regular chargebacks cause a business to end up in the banks spotlight, which could add insult to injury by hiking up future fees. 

Along with chargebacks being expensive, the impact is ultimately on the customer relationships and brand loyalty. According to a survey, approximately 50% of purchasers confirmed that they would not shop again from a company where they had previously been involved with a chargeback claim or process.

With this in mind, chargeback mitigation should come at the top of any e-commerce merchants priority list. A heavy handed and manual review routine could result in the reduction in the number of chargebacks, but this could also lead to a negatively impacted buyer journey, and turning away good customers and increasing the  driving rate of false declines.

Ultimately, the best way to limit and even reduce online chargebacks all together is to levera data-based decisions that analyze the customers shopping behaviour in more detail.
However, manually reviewing huge amounts of data in an attempt to reduce chargeback fraud can be frustrating if you don’t know what to look for, so we’ve made a quick overview showing some key fraud trends and how they impact chargebacks

Product based fraud trends

Certain goods can be more attractive to people who commit frauds, for a number of reasons. Items such as cell phones and luxury items are immensely popular as they are easy to resell on secondary markets. Other products, such as digital gift cards, attract fraudsters because they are instantaneously fulfilled digitally.

Survey data unveils that, apart from phones and gift cards, items such as  sneakers, event tickets, and travel products are also more likely  to be targeted and incur higher rates of fraud. When fashion merchandise is targeted, fraudsters go for high value products, quickly snapping up on industry trends while demand is high and moving on.

Market based fraud trends

It is common for online ecommerce platforms to flag transactions placed from those they label as ‘high risk’ countries. Some countries are stereotyped as being  hot zones for online fraud activities. But with a recent survey revealing that over a billion transactions within a high fraud regions were actually safe during 2019, Merchants must have  a process and systems that treat each purchase on its own merits.

For instance, when the data taken from different online transactions  was analysed, it was found that 80% of orders placed from Mexico were traditionally accepted. Upon further inquiry, when orders were made by using Mexican cards from within Mexico, the items shipped were approved 90% of the time. Combining card and region data would allow a business to accept more orders from Mexico, rather than turning legitimate customers away due to an overly simplistic rule .

Seasonal fraud trends

A shopper will behave differently at different times of the year based on if he or she is shopping for themself or for someone else. It is the duty of the selling company to know these differences and how the behavior of the shoppers changes during the year. 

An obvious example of this is the Christmas holiday shopping season. All through the year, most clients have their orders sent to the same location as the stated billing addresses. Those that do not do so, more often than not have changed houses without changing their billing address or just have the orders shipped to their offices. However, during the holiday shopping season, companies usually see as much as four times as many orders every single day with a disparity that exists between billing and shipping addresses. This can often set off alarm bells within ecommerce platforms against legitimate orders.

What to do with this data

Getting a deeper understanding around the way that your customers online purchasing behaviour will change throughout the year is an investment that is sure to pay off.  But with more customers, comes more data to sift through. This increases the need for automated fraud detection and prevention software like Spotrisk, that can analyse customer behaviour and their related data points in real time, ensuring that regular and costly chargebacks become a thing of the past. 

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