Tom-Chris Emewulu
Chargeflow's Digital Evangelist
Table of contents

Chargeback fraud has plagued eCommerce merchants for over a decade. And in 2023, it's becoming a significant challenge, with potential losses reaching $117 billion, according to several sources. These fraudulent chargebacks also pose a managerial burden, especially for merchants trying to find their foot in the market.

Chargebacks, once meant to safeguard consumers, are increasingly misused for fraudulent claims. By favoring customers with minimal verification, the system has become prone to abuse, placing a heavy disadvantage on merchants. It disrupts business operations and harms merchants' reputations.

Even so, chargebacks are an unavoidable aspect of online business. Using data-driven strategies to address chargebacks before they become chargebacks is essential for merchants to reduce financial impacts.

The question is, how can one use data to stop chargebacks in their tracks and distinguish legitimate requests from fraudulent cases? This article will focus on best tactics and offer ways to effectively leverage data for chargeback management in your business.

Customer Profiling and Utilizing Shopping Data

The good thing about chargebacks is they often follow a pattern. When identified and analyzed, you can leverage these patterns to build a proactive defense system against potential fraud. By scrutinizing transaction data, you can spot irregularities often preceding chargebacks, such as:

  • Address mismatch,
  • Unusual buying behaviors,
  • Inconsistent billing details,
  • History of chargeback fraud, etc.

This preemptive approach allows quick differentiation between legitimate transactions and potential frauds, streamlining the selling process and reducing risk.

Chargeback fraud is not limited to professional scammers alone. Even regular people can commit such fraud.

Our internal data shows that friendly fraud or intentional abuse of the chargeback process leads to at least 70% of all chargeback cases. Shopify stores can use customer profiling as one effective strategy to fight such chargeback fraud.

What's the source of truth for such data, you ask? Look at past customer data like what customers bought, how they paid, and how they interacted with the store. By reviewing such pertinent details, business owners can determine which customers will likely make a chargeback claim. Businesses using Chargeflow's automated chargeback solution have this investigative tool as the package through ChargeScore.

Such a meticulous look at customers goes beyond preventing fraud, as it enables Shopify store owners to understand their market better and sell to various customer segments. For instance, if data analysis reveals that customers from specific regions or identified by factors like location, time, or IP frequently request chargebacks, store owners can adapt their strategies for protection. This could include measures such as not accepting credit cards from those particular customers or stopping selling to that location.

It gets even better.

You can use rules-based systems (such as the contents of a shopper's cart and the total purchase amount) to enhance fraud decisioning. High-value items or products frequently associated with fraud can trigger more attention. You can implement simple but effective rules to limit credit card usage for these high-risk transactions or flag them for quality assurance. Additionally, verifying customer details like emails, phone numbers, and addresses is profitable for early fraud detection.

Fortunately, all these measures are straightforward to implement with tools like Checkout Wiz. It streamlines the rule-setting process, allowing store owners to quickly safeguard their business against fraud by selectively restricting payment options and implementing validations.

Data-Driven Chargeback Management

Data plays a crucial role in preventing chargebacks at the checkout stage and proves invaluable in managing them effectively when they occur. Chargeflow shows this with its Chargeback Alert, which leverages data to provide early warnings to merchants about potential chargebacks. This lets you take timely and informed actions, such as engaging with customers for clarification or issuing refunds when necessary, thereby helping to preserve valuable customer relationships.

Chargeflow also uses data-driven insights for its standout feature, ChargeResponse, to pull the most comprehensive compelling evidence from over 50 customer touchpoint and submit it on the merchant's behalf. You no longer need to worry about meeting the deadline for chargeback disputes, as it is now taken care of for you.

All this underscores the power of data in better transactional security and decision-making processes in eCommerce. Streamlining chargeback management by automating dispute response and evidence-gathering processes empowers merchants to respond to chargebacks more efficiently and accurately.

Chargeflow and Checkout Wizard: A Holistic Approach

Pairing Chargeflow and Checkout Wizard together provides a comprehensive strategy for handling chargebacks in Shopify stores. Before checkout, Checkout Wizard is your gatekeeper in analyzing customer data and purchase patterns to preemptively identify and lower the risk of fraudulent chargebacks. This early intervention is crucial for preventing fraud.

Once a transaction is complete, Chargeflow steps in with detailed monitoring and rapid response for any chargeback issues. With its advanced alert system, Chargeflow effectively distinguishes between legitimate and fraudulent chargebacks, enabling timely and accurate responses.

This innovative approach equips Shopify merchants with everything they need to tackle chargeback challenges before and after sales, enhancing security and customer trust in the eCommerce environment.

Wrapping Up

Research shows the holiday season, often marked by a surge in sales, also brings an uptick in chargebacks. This is a challenge you may have faced already. As the peak season draws closer, now is the best moment to focus on fortifying your Shopify store against future chargebacks to avoid surprises in the New Year. Implementing the strategies in this article — from leveraging customer profiling and shopping data to pre-empting dispute losses with Checkout Wizard and Chargeflow — can be a game-changer for your business. By taking these proactive steps now, you set up a defense against any prospective chargeback fraud, ensuring that the next holiday season is profitable and free from the undue stress and financial strain of chargebacks.


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Average Dispute Amount
# Disputes Per Month
# Disputes Per Month
Time Spent Per Dispute
Time Spent Per Dispute
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
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