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5 Tips to Protect Your Business from Holiday Chargebacks and Fraud

This article was contributed by our exhibitor Chargeback Gurus.

The holidays are just around the corner, preceded as always by the biggest online shopping days of the year. With many stores closed or operating at reduced capacity due to the COVID-19 pandemic, eCommerce is set to have one of its most lucrative holiday seasons of all time—but like scavengers after somebody else’s feast, fraudsters are going to take every opportunity they can to profit from the increased volume (and reduced scrutiny) of transactions that goes along with the holiday shopping rush. What can merchants do to protect themselves from fraud and chargebacks over the holidays?

Over the holidays, merchants process more transactions than they do at any other time of year, and new or infrequent eCommerce shoppers often show up to buy gifts and take advantage of seasonal deals. Fraudsters know that the chaos of holiday shopping means that both merchants and consumers are letting their guard down, making it the perfect time for them to go on shopping sprees with stolen card numbers. By the time the cardholder realizes it, the fraudsters are long gone with their ill-gotten goods—but the merchant is still on the hook for the chargeback the cardholder will demand.

No merchant wants to turn away customers or slow order processing down to a crawl so they can manually review everything that looks a little bit suspect, but taking a few extra steps to improve your security and implement best practices for fraud and chargeback reduction can make a huge difference. Here are five of the most effective ways to stop fraud and chargebacks from cutting into your revenue over the holidays.

1. Prevention Alerts

When January rolls around, merchants start getting hit with waves of chargebacks from confused and dissatisfied customers. These chargebacks aren’t due to fraud, but because the customer forgets what purchases they made or has buyer’s remorse about some of the products they bought. Merchants may be able to fight and win against these chargebacks, but that takes time and effort that’s better saved for “friendly fraud” chargebacks—more on that later.

Visa and Mastercard offer chargeback prevention alert services through their respective third-party partners, Verifi and Ethoca, which allow merchants to easily resolve these disputes before they actually turn into chargebacks. These services send out an early warning message to merchants that gives them a chance to respond to the customer’s complaint or issue an immediate refund, thus obviating the need for a chargeback. Just remember that you only have a small window of time in which to respond.

2. Order Insight

Another Visa services offered through Verifi is Order Insight, which works similarly to chargeback alerts, but with automated information retrieval. When a merchant enrolls in Order Insight, issuing banks can submit inquiries about transaction disputes that can immediately and automatically be answered with data from the merchant’s CRM system.

That means that when a cardholder contacts their bank to dispute a legitimate charge that they simply don’t recognize, Order Insight can pull product and delivery information that the bank representative can relay to the cardholder, jogging their memory and negating the dispute—and the merchant doesn’t have to lift a finger.

3. Anti-Fraud Tools

Fraud has gotten very technologically sophisticated in recent years, and fighting it requires equally powerful and effective software tools. Fraud also comes in many varied forms, which means there are a lot of fraud-fighting options out there, and merchants need to be careful to select the ones that will actually make a difference for their particular situation. Some anti-fraud features, however, are almost universally beneficial.

Essential fraud-fighting features include Address Verification Services, which confirm that the cardholder has provided the right billing address for the card they’re trying to use; geolocation and device fingerprinting, which can tell you if the cardholder is misrepresenting their location or identity; velocity checking, which flags small, frequent transactions that are submitted to test whether stolen payment credentials are still working; and fraud scoring, which uses artificial intelligence to analyze transactions and determine whether they contain likely fraud indicators.

Programs like 3-D Secure, which makes the cardholder perform an additional step to verify their identity, can also be highly effective at stopping fraud.

4. Merchant Descriptor

Shoppers buy a lot of things over the holidays, and they don’t always remember all of their purchases. When they review their bank statements after the fact and see names they don’t recognize in the merchant descriptor field next to a credit card transaction, they often assume it’s a fraudulent transaction and try to dispute it.

Unfortunately, many merchants set up their accounts with business names that don’t match the store or website name that the customer will recognize. This is an easy fix—just contact your payment processor and update the name to one that your customers will recognize immediately. You may be able to include a phone number or website address too.

5. Chargeback Representment

Some cardholders find it easier to request a chargeback from their bank than to resolve a problem directly with the merchant. Others deliberately file chargebacks as a form of cyber-shoplifting to get products for free. The chargebacks that result are known as “friendly fraud,” because they come from what appear at first to be legitimate customers.

All the major card networks allow for a representment process that allows merchants to fight chargebacks by submitting the disputed charge again, along with documented evidence that proves that the cardholder’s dispute claim is invalid. The right kind of evidence will depend on the reason code assigned to the chargeback. By fighting these fraudulent chargebacks, merchants can recover their revenue and prevent themselves from becoming victimized repeatedly by bad actors.


The holidays are a great time to draw in new customers and increase your sales, but you have to be prepared for the downside. With the right tools and strategies, merchants can screen out fraud, resolve the issues raised in good faith by real customers, and fight the fraudulent chargebacks submitted by scammers who are out for a free ride. With these five tips, you can begin to build a plan for fraud and chargeback defense that will keep your spirits bright and your finances healthy through the holidays.


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