What Payment Facilitators Can Do To Reduce Chargebacks

Mar 13, 2020

According to a report on Statista.com, retail e-commerce sales in 2019 reached a whopping 3.53 trillion US dollars. Online retail’s revenues are expected to reach 6.54 trillion US dollars by the year 2022. The soaring numbers indicate that online shopping is continuing to grow in popularity worldwide. With this much cash floating across the interwebs, there is no doubt that fraudsters are keen on taking advantage of online payment fraud. 

In a troubling finding, Juniper Research reported that, “online sellers will lose $130 billion to online payment fraud between 2018 and 2023.” These staggering numbers reflect the mounting costs that sellers must contend with when they experience fraudulent activity. Some of those costs include: chargeback fees, the distribution of merchandise, investigation on the fraudulent activity, legal prosecution, and software security. These costs are monetary, then there are the costs of tainting the brand’s reputation and ultimately losing the customers’ loyalty.  

Who Are The Victims Of Online Payment Fraud?

Customers are the first victims who are affected by online payment fraud. Once they learn that their credit cards have been compromised, they have the unpleasant task of contacting their bank and having to cancel their credit card and wait for a new one to be sent. With certain banks, the entire process can take up to two working days to sort things out.

Online sellers stand to lose the merchandise that was placed on order and then they are on the hook for providing their customers their money back, if their card information was stolen. This is what you call a chargeback. Then the seller has to pay a chargeback fee to their payment provider.

When it comes to payment providers in Europe, there was a revision in the Payment Service Directive or (PSD2), which indicates that these providers will now have full legal responsibility for fraud within its portfolio of online sellers.

What Can Payment Providers Do To Reduce Fraud and Chargebacks?

The detection and prevention of fraud has advanced over the years. There are basically three “pillars of fraud detection.” They are…

  • Refining a Rules-Engine

When you use a “traditional rules-engine” all payments that fall into certain criteria, such as high value purchases are automatically blocked, as they are more likely to be a fraud. This is an excellent fraud detection tool that allows you to monitor purchases more closely. However, you can also potentially block out legitimate customers. Best to refine this approach using both rules and machine learning to pack a powerful, fraud-detecting punch.

  • Use Machine Learning

Machine learning utilizes trained models to identify each transaction as being low, medium, or high risk. These machine learning models are capable of analyzing payments in real time, using both past and present data concurrently. It can process thousands of payments per second with minimum human involvement.

  • Link Analysis By Using Graph Networks

Link analysis is a data-analysis technique that seeks to assess the relationships and connections between organizations, people, and transactions.  Graph networks serve the same purpose. They allow you to connect data to reveal what the fraudster looks like, in order to ban them from making payments.

Seek Fraud Solutions To Fit Your Business

As a payment facilitator, it is critical to have systems and processes in place to mitigate payment fraud at any level. At the basic level, use your underwriting protocols to screen merchants to avoid onboarding shady players. This can be partnered up with more sophisticated fraud solutions.

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

Live Chat