An important factor in preventing online payment fraud is EMV, standing for Europay Mastercard Visa. EMV represents a set of global standards based on chip card technology. Chip card technology revolutionized the payments industry and allowed for the secure processing of electronic payments. It has single-handedly given businesses the upper hand in protecting their bottom line and their customers from fraud. This is because magnetic swipe technology can be easily compromised by hackers. Chip technology is much more difficult to hack, making a safer and more secure environment for both businesses and customers.  

EMV liability shift refers to the transfer of responsibility for financial losses due to the fraudulent use of credit cards. Because fraudsters could easily copy magnetic swipe cards, card companies were responsible for the losses incurred due to fraud.  

To fight fraud effectively, card companies united globally to create EMV technology, rolling out chip cards in 2015. They’ve been proven to reduce in-store counterfeit fraud wherever chip card technology has been implemented. Many businesses don’t understand that when chip cards were implemented, the responsibility for financial losses transferred from card companies to businesses. 

The EMV liability shift reduced the costs of counterfeit fraud and made payments safer for everyone. Not all businesses have upgraded to EMV-ready terminals and fraudsters knowingly target these businesses. If you haven’t upgraded your terminal, your business is vulnerable every time a chip card is swiped instead of inserted. 

 

Online Payment Fraud Prevention 

Online payment fraud can often begin as a slow leak, and then boom— fraudulent transactions pour in, and businesses suffer. Ecommerce retailers get an average of 206,000 web attacks monthly and 47% said they’ve experienced fraud in the past 2 years. Thankfully, there are tools and technologies in place to help merchants fight against this. 

Fraud management relies on both technology and human intelligence. The goal of the process is two-fold: enable fraud prevention while promoting sales, both requiring a delicate balancing act. This is because fraud detection tools rely on machine learning-based AI algorithms to determine transaction legitimacy. If not properly taught, calibrated, and monitored, false positives reject too many sales. Merchants in turn lose revenue due to suspected fraud and may lose new customers.  

Some online payment fraud prevention tools include two-factor authentication, card verification value (CVV) verification and device fingerprinting. These tools can be used together to create a layered approach to online payment fraud prevention. 

To prevent credit card fraud, it’s important to monitor your account regularly, use secure websites, and avoid sharing personal information. Other measures include setting up alerts for suspicious activity and avoiding public Wi-Fi when making transactions. By being vigilant and taking proactive steps, you can help protect yourself from fraud and minimize the risk of losses. 

 

Online Credit Card Fraud Prevention Tips 

Merchants need to start thinking about online payment fraud prevention measures. Here are a few different ways on how to prevent credit card fraud: 

1. Mastercard SecureCode and Verified by Visa: These 3D Secure protocols ensure the person attempting the purchase is the owner of the card prior to authorization. These tools cut down on fraudulent transactions and boost consumer confidence knowing their information is being verified and protected. 
2. Address Verification Service (AVS): This is another tool that validates whether the person using the card is the cardholder or not. At the time of purchase, AVS validates the billing address given with the one on file during authorization. If the authorization is approved and the AVS response indicates a match, the merchant can proceed with the transaction.
3. Card Verification Value 2 (CVV2): This protocol requires the purchaser to enter the three-digit security number printed on the back of their credit card. This verifies that the customer making the purchase is in possession of the actual payment card. 
4. Tokenization: Payment tokenization eliminates the need for merchants to handle or store payment data. Instead, sensitive payment data is replaced with a unique identifier called a “token”. The actual payment data is then stored in a third-party data center.
5. Chargeback Alerts: Some third-party solution providers offer chargeback notifications that alert a merchant when a dispute is filed. This typically happens when it’s filed with an issuing bank in the solution provider’s network. This gives the merchant an opportunity to handle the dispute directly with the customer rather than after the process has started. Since chargebacks result in fines and penalties for merchants, it’s optimal to address disputes before they turn into chargebacks. 
6. Device Fingerprinting: A device fingerprint is a pattern of online behavior that’s identified and attached to a particular device. It can be used to identify devices that have previously been known to commit online fraud or identity theft. Using this tool makes it easy to block purchases and transactions from those devices. 
7. IP Geolocation: IP geolocation can be used to identify anomalies in CNP transactions that may signal fraud. For example, if an address associated with Chicago is entered, but the IP address is in Brazil, this would signal fraud. Depending on the tool, it may block the transaction altogether or route to a manual review team for further research. 
8. Behavioral Modeling/Profiling: Some third-party payment solution providers have created algorithms based on machine learning technology that enables behavioral modeling and profiling. This rules engine can identify and detect potential fraud based on anomalies to establish behavioral patterns associated with payment card data. When “out-of-the-ordinary” patterns or behaviors are identified, the engine alerts the merchant of the inconsistency. From there, merchants can decline the order or submit for manual review and further authentication. 
9. Big Data: Merchants can tap into multiple data sources in real-time to identify inconsistent or anomalous transaction behavior. Some tools gather social data to detect inconsistencies in location or other identifying information. Other solution providers offer access to negative information databases and behavioral databases. These allow merchants to sniff out suspicious orders and route them for additional verification or review. 

Preventing online payment fraud requires a combination of awareness, vigilance, and practical measures. As online transactions continue to become more prevalent, it’s crucial to take the necessary steps to safeguard your financial information. By following the tips outlined, you can significantly reduce the risk of falling victim to online payment fraud. Prevention is always better than cure, and investing in your online security is a small price to pay for financial security. 

How can PAYARC help with online payment fraud prevention? 

PAYARC uses advanced fraud detection tools, encryption, multi-factor authentication, and tokenization to prevent online payment fraud. These measures ensure that transactions are monitored, sensitive data is protected, and an additional layer of security is added to online transactions. These features help businesses and consumers feel confident in their transactions and minimize the risk of falling victim to fraud. 

Contact us today and start protecting your online payments! 

No business is immune to chargebacks. Chargebacks occur when a customer disputes a transaction.

Customers may dispute transactions for a number of reasons, including non-delivery of products and services, miscommunication about a refund, misunderstanding of the amount of the charge, or a variety of other reasons.

Once you receive a chargeback, you will want to track the progress of your resolution process. You can do so easily with reason codes.

Here’s how reason codes make it easy for you to check the status of your disputes or chargebacks:

MasterCard chargeback reason codes are a set of four digits beginning with the 48xx.

Mastercard Reason codes fall under four categories.

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Authorization

4807 – Warning Bulletin File

4808 – Authorization-Related Chargeback

4812 – Account Number Not On File

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Cardholder Dispute

4841 – Cancelled Recurring or Digital Goods Transactions

4853 – Cardholder Dispute

4854 – Cardholder Dispute – Not Elsewhere Classified

4855 – Goods or Services Not Provided

4859 – No Show/Addendum/ATM Dispute

4860 – Credit Not Processed

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Fraud

4837 – No Cardholder Authorization

4840 – Fraudulent Processing of Transactions

4849 – Questionable Merchant Activity

4863 – Cardholder Does Not Recognize/Potential Fraud

4870 – Chip Liability Shift

4871 – Chip/PIN Liability Shift – Lost/Stolen/Never Received Issue (NRI) Fraud

 

Point of Interactions Errors

4831 – Transaction Amount Differs

4834 – Point of Interaction Error

4842 – Late Presentment

4846 – Incorrect Currency Code

 

The only way to avoid chargeback disputes is to avoid chargebacks altogether.

Here are a few proven tips to prevent chargebacks:

Magnetic stripe technology can be easily compromised by the sophisticated hackers of today. Thankfully, chip technology is incredibly difficult to hack, which allows for a safer and more secure environment for your business and your customers.

When chip cards were globally adopted in 2015, important changes were also made in how liability is assigned for credit card fraud.

Mastercard Chargeback Prevention Tips:

• Process credit immediately
• Share the return or exchange policy before completing the checkout process
• Keep dissatisfied customers in the loop about the steps you are taking to resolve the dispute
• Obtain the customer’s signature for items picked up in store, work orders, etc
• Bill customers after products are shipped or service provided

Need Help with a Chargeback Dispute?

If your business has been subject to a Mastercard chargeback dispute, or if you have received an inquiry – you need to act fast.

Get in touch with us right away so we can help you successfully navigate a Mastercard transaction dispute with ease and confidence.

All card brands have their own reason codes, and they’re meant to keep things organized when a dispute occurs. Visa has 4 categories for disputes: Fraud, Authorization, Processing Error, and Consumer Dispute.

Fraud Codes

Fraud is given the reason code 10. There are 5 fraud reasons:

• 10.1: EMV Liability Shift Counterfeit Fraud
• 10.2: EMV Liability Shift Non-Counterfeit Fraud
• 10.3: Other Fraud – Card Present Environment
• 10.4: Other Fraud – Card Absent Environment
• 10.5: Visa Fraud Monitoring Program

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Authorization Codes

Authorization is given the reason code 11. There are 3 authorization reasons:

• 11.1: Card Recovery Bulletin or Exception File
• 11.2: Declined Authorization
• 11.3: No Authorization

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Processing Errors

Processing Errors are given the reason code 12. There are 7 processing error reasons:

• 12.1: Late Presentment
• 12.2: Incorrect Transaction Code
• 12.3: Incorrect Currency
• 12.4: Incorrect Transaction Account Number
• 12.5: Incorrect Transaction Amount
• 12.6: Duplicate Processing or Paid by Other Means
• 12.7: Invalid Data

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Consumer Disputes

Consumer Disputes are given the reason code 13. There are 9 consumer dispute reasons:

• 13.1: Services Not Provided or Merchandise Not Received
• 13.2: Cancelled Recurring Transaction
• 13.3: Not as Described or Defective Merchandise/Services
• 13.4: Counterfeit Merchandise
• 13.5: Misrepresentation of the Purchased Good and/or Service
• 13.6: Credit Not Processed
• 13.7: Cancelled Merchandise/Services
• 13.8: Original Credit Transaction Not Accepted
• 13.9: Non-Receipt of Cash or Load Transaction Value at ATM

In commerce, presentment refers to furnishing a bill, note, or other document as for acceptance or payment. In most transactions, a merchant usually only needs to complete one form of presentment. However, if a transaction is disputed and results in a chargeback, the merchant must submit a second presentment (sometimes referred to as re-presentment) in order to prove that the transaction was valid.

Both MasterCard and Visa have rules regarding the second presentment part of their chargeback resolution process. The chargeback resolution process exists to collect evidence and determine in either the merchant’s or consumer’s favor. The rules are similar, as second presentment is a necessary step in proving whether or not a chargeback was valid.

When going through Visa’s process, this part is called “Dispute Submission.” When dealing with fraud & authorization issues, Visa will determine whether or not a charge was fraudulent based on the information they have. When dealing with consumer & processing errors, Visa will have issuing banks fill out an enhanced questionnaire, which counts as what we would call “second presentment.” This questionnaire aids Visa in determining the outcome of the chargeback resolution and, if sufficient evidence is presented to prove that the chargeback was invalid, can result in a judgment in your favor.

Second presentment in the MasterCard chargeback resolution process falls under “Cycle #2.” When the acquiring bank refutes the issuing bank’s first chargeback, the acquiring bank must present evidence that the transaction was valid and that the chargeback should not have been filed in the first place.

In order to present sufficient evidence that the transaction was valid, be sure to keep careful documentation of all transactions as proof. These documents can include things like a signed sales or delivery receipt or correspondence with the customer. Be aware of the timelines that Visa and MasterCard have set forth in their guides, to prevent violating the time limit for second presentment.

Whether you’re a high-risk or low-risk merchant – chargebacks apply to everyone. Not only do chargebacks harm your bottom line, but they can also negatively impact your standing with card associations.

Chargebacks happen when a customer disputes a transaction. Customers may dispute transactions for a number of reasons, including non-delivery of products and services, miscommunication about a refund, misunderstanding of the amount of the charge, or a variety of other reasons.

Whether you realize it or not, card associations are paying attention to your chargebacks! Specifically, they keep an eye on your chargeback ratio.

What is a chargeback ratio?

A chargeback ratio measures the ratio between the number of chargebacks to the number of transactions you have earned as a merchant.

Calculating Your Chargeback Ratio Is Easy

Simply divide the number of chargebacks by the number of transactions to determine your chargeback ratio. However, it’s important to note that there is an important distinction in how Mastercard and Visa calculate chargeback ratios.

How Visa Calculates Your Chargeback Ratio

Visa divides the number of chargebacks for the current month by the number of transactions for the current month.

How Mastercard Calculates Your Chargeback Ratio

Mastercard, on the other hand, divides the number of chargebacks for the current month by the number of transactions of the previous month.

Regardless of the card association, it’s crucial that you keep your chargeback ratios to a minimum so that your business stays off the “risk list”.

As a general rule of thumb, a chargeback ratio at 1% or above can potentially harm your business, so you will want to do everything you can to prevent chargebacks from occurring.

Here are a few proven ways you can prevent chargebacks:

Chargeback Prevention Tips that Work

• Process credit immediately
• If you have agreed to issue a refund to a customer, let them know when they will receive their refund.
• Be sure to clearly explain your refund or exchange policy before completing your customer’s order.
• Obtain the customer’s signature for items picked up in store, work orders, etc.
• You may want to consider billing customers only after products are shipped or service has been provided.

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Need 1-on-1 Help Navigating a Chargeback Issue?

When it comes to chargebacks, timing is critical.

We have extensive experience in helping businesses successfully navigate chargebacks.

Get in touch with us now for one-on-one help in resolving a current chargeback issue or to create a game plan to limit chargebacks in your business.

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Credit card associations are paying attention. Most card associations monitor merchant activity on a monthly basis. They keep tabs on everything from chargeback ratios, to disputes and fraudulent transactions.

Merchants are expected to keep disputes and fraud at acceptable levels. If your business receives excessive chargebacks, you could land on the chargeback monitoring program.

Here’s What Happens if Your Business is Placed in the Monitoring Program

If you exceed the threshold set by the card network, you will be placed on a monitoring program. In most cases, you will receive a warning before being placed in the program.

Businesses who receive a warning must take immediate action in reducing chargeback ratios.

Here are a few ways you can prevent chargebacks:

Chargeback Prevention Tips that Work

• Process credit immediately
• Keep customers informed about when they will receive a refund
• Share the return or exchange policy before completing the checkout process
• Obtain the customer’s signature for items picked up in store, work orders, etc
• Bill customers after products are shipped or service provided

In the event that your business is placed in the program, you may be required to pay monthly fines and additional fees until your level of fraud and disputes have gone down.

You’re going to want to take an active role in reducing your levels of fraud and disputes. Work with your acquirer to develop a strategy to reduce your chargeback levels – or what is also called a chargeback mitigation plan.

Need Help Creating a Chargeback Mitigation Plan?

If you want specialized help in preventing chargebacks, reducing your chargeback levels or creating a chargeback mitigation plan (required if you have received a warning), then get in touch with us so we can help you successfully navigate chargebacks and chargeback disputes.

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