Chargeback Loophole, UK Retailers Need Industry-Wide Change

Online fraud continues to be a huge problem for retailers, causing them to lose significant revenue. Some of the techniques fraudsters use are proving to be unstoppable. To make matters worse, authorities are unwilling or unable to step in and address the issue.

One high-end online retail CIO – who wished to remain anonymous – described the nature of the ‘chargeback loophole’. According to them, the situation involves a fraudulent purchaser denying receipt of goods, which then leaves the selling organization with no recourse but to accept its losses.

Cyber criminals will make a purchase online, sign for the goods once they arrive and then turn around and report non-delivery to the retailer. When the purchaser demands to have their money back, the retailer’s only option is to argue that the delivery did happen. Unfortunately, if the purchaser tells their card company that the delivery did not occur and the signature is not theirs, the retailer loses all rights to the funds.

“This loophole has to potential to set the online payment industry back, as this level of fraud continues to rise retailers will start to lose faith in the system,” said a CIO in the retail industry.

“Banks do not lose any money so have no interest in fixing the situation,” the CIO added. “The retail industry, merchants, banks and the courier services need to work together to bring about new standards in the same way as they did with [software-based authentication process] 3D secure.”

This chargeback loophole has been described as being a genuine threat to retailers. While MasterCard confirmed that this practice does exist, few retail professional “checks” to prevent this abuse appear to be helpful. With little direction and support, retailers are left to refund the purchase and pay processing fees – all while losing the disputed stock.

Many in the industry are calling for an industry-wide change to combat this rapidly growing problem. What can your business do in the meantime? If your retail business has been affected and you are looking for ways to prevent further chargeback fraud, start by identifying the reasons behind them. Eradicating misleading descriptions, streamlining services and monitoring suspicious activity will help you protect your business against potential risks and safeguard data.

Do you need more information or chargeback protection and prevention programsand other chargeback services to protect your retail business? Consider the many helpful reviews and information on chargeback insurance providers that Best Payment Providers has to offer.

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