Rising Payment Fraud in UK Overwhelming Merchants with Misunderstood Chargebacks

Chargeback remediation specialist Chargebacks911 is urging merchants in the UK to understand and use reason codes in the light of newly released fraud statistics.

The figures from Financial Fraud Action UK reveal that financial fraud losses grew by 26% in 2015. The research further highlights the growth in payment card fraud, up 18% over the same period to £567.5m and the value of card-not-present (CNP) fraud, including ecommerce, which was up 20% to £398.2m.

Monica Eaton-Cardone, co-founder of Chargebacks911, said these are staggering figures, illustrating a worrying upward trend in online fraud.

“The adoption of EMV in the US is pushing more fraudsters online, while complex new technologies have made it difficult for merchants to offer omnichannel experiences while remaining secure,” eaton-Cardone said. “Internationally, fraud on UK cards from overseas has risen 25% in the last year, according to FFA, and it’s clear merchants are struggling.”

Chargebacks911 has seen friendly fraud rise 150% since 2009, while chargebacks grew 55% in the same period. Part of the cost problem for merchants is that when they are hit by fraud they do not fully understand the reason codes reported back to them by the issuing bank.

Each card network, such as MasterCard or Visa, has its own unique set of chargeback reason codes, informing merchants of a host of reasons why they may have been hit with a chargeback, including merchandise or services not received, cancelled recurring transactions, counterfeit transactions, and goods or services defective or not as described.

Reason codes were first created as a valuable tool to help merchants understand chargeback management and analysis, but with the advent of friendly fraud, they have become less insightful. Payment networks often address consumer grievances differently, so Chargebacks911 prefers to categorize chargebacks for merchants by breaking it down to three main causes: merchant error, criminal fraud, and friendly fraud.

“Once a merchant understands the true reasons behind chargebacks against them, they can put in place the necessary steps to successfully dispute fraudulent claims, and best practice processes to minimize the risk of them happening again,” Eaton-Cardone said. 

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