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Web merchants fight Internet fraud
Credit card chargebacks are a way of life with most web-based companies and most of them had learnt to live with the inevitable loss of some money in the process of doing business. But now, more and more companies have begun to give fraudsters a run for their money and are refusing to give up without a good fight. I know all this sounds confusing so let’s start at the beginning.
Credit card chargeback is a payment fraud that saps hundreds of millions of dollars from online revenues of Internet-based companies. So, how does this kind of payment fraud happen? Let me explain with an example: A person orders a laptop from an online electronics company and offers to pay with his credit card. The laptop is shipped to him and his account is debited. However, after the due date, the person calls up the company and fraudulently claims that he hasn’t received the laptop. This would render the sale void and the person can then get his money and a free laptop as well. Alternately, the person could also claim that he did not order the product at all.
This just shows how easy it is for a customer to get a charge reversed. At the same time, it is extremely time-consuming for an Internet merchant to prove the sale was legitimate. Internet merchants suffer more from this kind of fraud because unlike a face-to-face sale, an online transaction does not require a customer's signature or credit card imprint.
However, now, Internet companies along with credit card firms are trying to fight back these fraudsters. Card companies are now offering payer-authentication services and other fraud-fighting tools and are also streamlining the process by which chargeback disputes are mediated. Visa and MasterCard already have some options available to merchants like a payer-authentication service, called ‘Verified by Visa’ for Visa cards and ‘SecureCode’ for MasterCard. If you are a cardholder registered with the programs, Internet retailers can ask for a password registered with your bank. This gives the retailer evidence of the purchase and advantage should a dispute arise.
And if you wanted to know what happened to the person who bought the laptop – well he first complained to the web-based company that he didn’t receive the laptop. When the company offered to send an FBI officer to his house to investigate, he immediately called back and informed them that he ‘just’ got the laptop!
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