Merchants prevent chargeback fraud  is a real and growing threat to merchants, and it’s one that shouldn’t be ignored. Not only do chargebacks cost businesses a significant amount of money, they can also damage relationships with banks and payment processors and even lead to the loss of the ability to accept card payments altogether.

While some chargebacks are the result of actual fraudulent activity, many are due to consumers that are trying to game the system in order to get something for free. These “friendly fraud” claims can often be prevented by merchants implementing simple strategies like clear communication with customers, accurate and thorough documentation, enhanced payment verification and security, and proactive responses to dispute inquiries and chargeback alerts.

Guarding Your Finances: Strategies to Detect and Counter Fraudulent Transactions

Some of the most common friendly fraud claims include the customer saying they didn’t receive their purchase, that the product was not as described (often referred to as SNAD), that they did not authorize the transaction, or that they requested a cancellation on a recurring service and the seller charged them anyway. This type of fraud is most often caused by people looking to make money at the expense of honest merchants.

It is also important for merchants to keep up-to-date on new chargeback reason codes so that they can properly advocate for themselves when a consumer disputes a legitimate transaction. For example, if a merchant can prove that the company name on the credit card statement is a match to the company name that was used in the purchase confirmation email, this can help overturn a chargeback in favor of the business.