E-commerce fraud costs online retailers billions of dollars every year. Chargebacks — where customers dispute transactions with their bank — are among the most damaging issues a merchant can face. Here is how to protect your business.
Understanding the Types of E-Commerce Fraud
- Card-not-present fraud: Stolen card details used to make online purchases
- Account takeover: Fraudsters gain access to customer accounts and make unauthorised purchases
- Friendly fraud: Customers make legitimate purchases and then dispute the charge with their bank
- Refund fraud: Customers claim an item was not delivered or was defective to obtain a refund
Prevention Strategies
Implement address verification (AVS) and card verification value (CVV) checks for all transactions. Use 3D Secure authentication for high-value orders. Monitor for suspicious patterns such as multiple orders to different addresses using the same payment method.
How to Handle Chargebacks
When a chargeback is filed, you have a limited window to submit evidence and dispute it. Keep detailed records of every transaction, including delivery confirmation, customer communications, and IP address logs. A well-documented dispute response significantly improves your chances of winning.
The best chargeback is the one that never happens. Proactive fraud prevention is always more cost-effective than fighting disputes after the fact.