Customers file an Unauthorized Transaction chargeback when they believe their cards were used for a transaction without their knowledge. In some instances, it could be that the customer was charged twice for the same transaction.

When a customer files an Unauthorized Transaction claim, the debit or credit card issuer will have to reverse the charge. And this process of bill reversal is called a chargeback.

The issuing card network will contact your acquirer, who, in turn, will contact you to clarify the transaction dispute. Although you can readily fight any chargeback, an Unauthorized Transaction chargeback happens to be one tough nut that many merchants can’t quite crack. We present to you a few words from the street from one Frontier Gamers:

“I own a Minecraft server, and almost every single chargeback that happens is always malicious. Almost any of the reasons to create a claim are very easy for me to fight. However, when it comes to "Unauthorized Transaction" claims, I can rarely win. There is no way for me to prove that it was authorized or anything to do about it. I can tell PayPal that the "Unauthorized Transaction" claim was malicious and confirm that they bought it and stuff like this, but that doesn't seem to help anything. I was wondering if you all could help me figure out a way to have higher chances to win these cases.”

In response to such merchant requests on best practices for fighting fraudulent Unauthorized Transaction disputes, below are useful tips and strategies you can easily incorporate.

Use fraud detection tools such as AVS and Security Codes.

When it comes to managing chargebacks, there’s one rule of thumb: Once a customer launches a chargeback claim, you will lose money. Whether you win or lose is irrelevant, as we’ve covered in previous articles. According to research, fraud costs the average merchant 1.47% of their total revenue each year.

So you must put preventive measures in place in place to protect your business from any form of Unauthorized Transaction kick in the butt. And one crucial way to actualize that is by using security instruments such as Address Verification Services (AVS).

AVS is a fraud prevention tool that examines the customer’s billing information to make sure they belong to the right person. It compares the customer’s issued billing address against the address on file with the credit card issuing bank. However, AVS is not a comprehensive tool for stopping Unauthorized. But the absence of a correct AVS is a significant fraud red flag that you should take seriously.

Of course, you can take your Unauthorized Transaction security a step further with Credit Verification Value (CVV). CVV is the 3-4 digit number on the back of the Visa, MasterCard, and Discover card, or the 4 digit code on the front of an American Express card. Many countries are now mandating CVV for online payments as it is proof the card is with the rightful owner, thereby minimizing the risk of Unauthorized Transactions.

Again, industry data shows that 30% of chargebacks are a result of Unauthorized Transactions. Including AVS and CVV check out processes will mean that the issue of chargebacks will go away. But, it’ll surely go a long way in minimizing the volume of having Unauthorized Transactions that come your way.

Screen customers’ IP addresses and track their fraud risk score.

Another essential preventive security measure you can use to minimize the risk of Unauthorized Transactions is to keep track of your customers’ IP addresses and fraud scores. Technology tools such as geolocation help you accurately tell who is placing the order based on the IP address. This tool can help to mitigate the limitations of the AVS. You can quickly compare the customer’s IP address against the information on file with the issuer to ensure no foul play.

And where geolocation falls short in revealing the customer's actual IP address, as criminals often use proxies to try and disguise their IP addresses, Proxy Piercing comes into play. With this tool, you can quickly sift through various transactions based on IP addresses and reduce the risk of processing Unauthorized Transactions. Another wonderful thing about proxy piercing is that it can help you trace a fraudster’s location if an Unauthorized Transaction has already happened. 

Besides paying attention to your customers' order origin, you must also keep an eye on their fraud score! With fraud scoring, you can quickly tell the amount of risk that the transaction represents. It can be useful in deciding which order could fall into the Unauthorized Transactions radar. You can design your system to blacklist such clients or reject the transactions automatically. However, the process of setting up the fraud scoring tool can be complicated and subjective. You also run the risk of blocking legitimate transactions.

Make sure that you ship your orders with tracking details.

Apart from being a critical way to futureproof your Unauthorized Transactions representment efforts, order tracking has several other benefits. When a customer places order, they immediately begin to think about the delivery date. So it’s incredibly vital that you have an order tracking information included in every purchase. Even when customers forget about a transaction, which is prone to result in an Unauthorized Transaction chargeback, you can have compelling evidence to show they received and interacted with the order.

And even if you shipped a digital good, you can also provide ePacket tracking to give your clients as much control of the purchases as possible. And again, to futureproof your representment in the case of any Unauthorized Transaction claim. Even if you determine that the Unauthorized Transaction claim is bogus but do not have sufficient evidence to provide it, you will lose the case. Companies like PayPal will automatically rule in favor of the customer if the merchant cannot order tracking information.

Having included the order tracking information in your compelling evidence stalk when fighting an Unauthorized Transaction claim, some additional tools can boost your arsenal. These include a weblog, time stamps, customer emails that can show the card owner, and the person who placed the order are related, order delivery details such as customer signature, and evidence that the customer lives or works at the address delivered. 

Get professional assistance in mitigating Unauthorized Transaction chargebacks.

There’s no denying the fact that fighting chargebacks can be messy, time-consuming, and significantly expensive. And because of the global trade glitches these days, e-commerce merchants are finding themselves in a New Normal fraud zone. For example, data from Mastercard estimates that globally, chargeback disputes will climb from $23 billion in 2018 to $35 billion in 2021.

What this means is that e-commerce businesses lose $3.94 for every $1 from a chargeback. And Unauthorized Transactions holds a significant portion of the basket. And if you think that by ignoring it, the problem will go away, you are wrong. 40% of customers who file a chargeback will do it again within two months. And 50% of those people will file another chargeback within three months.

Here’s more: One credible survey shows that card-Not-Present(CNP) fraud could increase by 14% by 2023. In monetary terms, that will result in an expected loss for retailers to the tune of $130 billion.

Fortunately, Chargeflow has built a transparent and reliable Chargeback management software to help you put a comprehensive "Unauthorized Transaction" protection wireframe around your business. With our AI and Machine Learning algorithm, you can have real-time insights into your customers' buying patterns and receive useful data to help you spot irregularities and red flags that the naked eye cannot spot. As online shoppers continue to shift gears in their strategies and schemes, so do our intelligent technology. We designed to pair expert manual review with over 50 data points and make accurate judgments on every transaction.

Aside from helping you save more money by flagging suspicious Unauthorized Transactions, our system can also help you fight chargebacks and win! Our process is seamless - when a chargeback claim happens, we sift all the transactions involved to build a solid case that helps you come out on top! It’s simple, we do the work, and you get the results! Sign up with our 2-click process and experience the Chargeflow exceptionalism for yourself.


Tom-Chris Emewulu
Chief Disputes Analyst

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