Risk Compliance & Fraud

Why fight Chargebacks when you can prevent them?

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Online sellers will lose $130 billion to online payment fraud between 2018 and 2023

  • Your products may be great, your customer service may be outstanding…but every business that accepts credit cards is vulnerable to chargebacks. And if recent history is any indication, there’s a very good chance that the chargebacks you receive will be fraudulent.
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Because of this, banks, merchants, and card networks often classify chargebacks into three distinct categories to determine how they should be approached. 

These can be classified into three types of chargebacks.

Most chargebacks occur due to merchant error

  • poor customer service
  • unwanted recurring payments
  • authorization errors
  • faulty product fulfillment

True fraud

  • This chargeback involves actual fraud. Individuals could purchase your product or service using stolen credit card information

Friendly fraud

  • The customer could be looking to use the product or service without paying for it.

    Occasionally, this type of fraudulent chargeback is used to navigate around interacting with the merchant in order to receive a refund. Instead, the customer could file a chargeback directly with the bank.

    If you are involved in the e-commerce business and your transactions involve 100% card-not-present purchases, you would most likely deal with plenty of friendly fraud chargebacks.

 

Frequently Ask Question

According to a study released by Juniper Research, eCommerce merchants stand to lose roughly $20 billion in 2021 due to criminal activity; an 18% increase over the $17.5 billion lost in 2020. This indicates that the rate at which the cost of online fraud grows is accelerating. Criminal activity is going to be more of a problem than ever for merchants over the next several years.

YES, any payment processor can increase the rate at any time, however by law they are supposed to notice the merchant 90 days prior to the rate increase.

Auto-Renewal Agreements are addressed in the latest Code of Conduct. Merchants can notify their processors at any time if they do not wish to auto-renew their agreement. They are not required to do this during a specific period (such as 30 days before the termination date). In addition, auto-renewal contracts have been limited to six-month terms, so that even if you forget to notify your payment processor, the company cannot review your contract for more than 6 months.

Interchange rates are non-negotiable. However, there are certain ways that you can optimize your interchange fees,which will ultimately lead to a lower interchange fee per transaction.

There are multiple factors that affect your interchange fees, the industry you are operating, the type of transaction you receive, the transaction size and volume you process and also of card brands and card type, there are multiple ways that you can adjust how you take credit cards transactions to qualify for a lower interchange category. This is known as interchange optimization, which will ultimately lead to a lower interchange fee per transaction.

In April 2015, both Visa and MasterCard introduced lower interchange rates. According to the updated Code of Conduct, merchants can immediately cancel their existing agreement if the reduction in interchange costs is not fully passed on to them. Due to Canada's tiered (qualified/nonqualified) price structure, price reductions might not fully reflect the lower interchange costs.

PCI (short for PCI DSS) Compliance, stands for Payment Card Industry Data Security Standard. It is a set of security standards designed to ensure that all companies that accept, process, store or transmit credit card information maintain a secure environment to protect both the consumer and the merchant.

Some processors issue fines in the form of extra fees if you’re not doing your part to stay PCI compliant.

Are you probably thinking, how refund transactions impact credit card processing fees?

Visa does not charge interchange fees for refund however Mastercard is not the same! In most cases, you should pay a refund processing fee too.

On Aprile 23 2022 announcement from Mastercard interchange, you can clearly see that you will get charged a refund fee if you issue a refund to a customer basically you pay the processing fees twice!

once when you run a sale for the customer and again when you issue a refund to them!

Mastercard card refund processing fees in Canada are available here.

You won't be reimbursed those costs when the refund gets processed and you will pay another fee to run a refund transaction!

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