Fortifying Your Business: Proactive Strategies to Prevent Chargebacks and Fraud

Reducing or even preventing chargebacks and fraud is critical for vendors to maintain good relationships with payment processors and protect their bottom line. Usually, these things are easier said than done but learning the essentials is the first step on the way to building a profitable business.  Here’s a concise guide on how to prevent chargebacks and minimize the risk of chargeback fraud.

What exactly is this chargeback?

So that we are on the same page, a chargeback is the process where funds are returned to a cardholder by their credit or debit card provider after the cardholder challenges a transaction. Instead of a refund, where a business voluntarily returns the money, in a chargeback, the bank forcibly withdraws the funds from the merchant’s account. The bank then holds these funds during an investigation of the dispute’s validity. If the bank determines the cardholder’s claim is valid, the money is returned to the cardholder. Sometimes it’s for a reason, sometimes it’s fraud, plain and simple.

chargeback rate by industry or business type

Why is chargeback happening in the first place?

As a vendor, you have to understand the reasons for chargebacks. Obviously, it’s essential to find out the reasons behind chargebacks to address them effectively. Some common reasons may include:

  • Unauthorized transactions.
  • Product or service not as described.
  • Non-receipt of a product or service.
  • Duplicate billing.

Or like I said earlier, this might be a fraudulent chargeback.

How to prevent chargebacks?

Preventing chargebacks may be as simple as following these best practices and just being honest and straightforward with your customers. 

  • Provide Clear Product/Service Descriptions: Make sure that all product and service descriptions are clear and accurate. Preferably include clear images, dimensions, and any other relevant details about the items you offer. 
  • Incorporate Transparent Policies: Make sure return, refund, and shipping policies are easy to understand and accessible. Let’s skip the fine print. 
  • Offer Quick Customer Service Response: Answer customer inquiries and complaints promptly. Effective communication can prevent many chargebacks. Live chat, messenger chatbot for FAQs, or phone. It’s your call.

Chargeback Fraud Prevention tools and tactics

Preventing chargeback fraud is a bit more complicated but still doable.

You can start with Fraud Detection Tools:

  • Address Verification System (AVS): Verifies the address of the person claiming to own the credit card.
  • Card Verification Value (CVV): Asks the customer for the security code on their card to prove they have the physical card.
  • Geo-location: Track where orders are coming from and identify if they’re from high-risk locations.
  • Device fingerprinting: Helps identify if the same device is being used for multiple suspicious transactions.
  • Require Strong Authentication: Implement tools like 3D Secure, which requires customers to complete an additional verification step with their bank.

There are some third-party payment processors like which is a comprehensive chargeback and fraud prevention platform tailored for vendors seeking cutting-edge tools and insights. Designed with the modern merchant in mind, it offers an array of features that focus not only on prevention but also on understanding the reasons behind chargebacks, ensuring that genuine customers aren’t unintentionally inconvenienced.

Apart from using fraud detection tools, simply use common sense and follow these actionable tips that might help you prevent chargeback and chargeback fraud.

Chargeback Fraud Prevention Tactics

  • Keep Detailed Records: Keep detailed transaction records, including IP addresses, timestamps, signed delivery confirmations, and correspondence. This can help dispute chargebacks if necessary.
  • Set Up Alerts: Use systems that notify you of suspicious activity, like multiple transactions from the same IP address or rapid high-value transactions.
  • Train Staff: Ensure that your staff understands the signs of potential fraud and the importance of following procedures. Provide an onboarding course for new hires if you need to. 
  • Incorporate Delivery Confirmation: Especially for high-value items, use shipping services that require a signature upon delivery. Better safe than sorry. 
  • Provide Transparent Billing Descriptors: Ensure your billing descriptor (the name that appears on the customer’s statement) is recognizable so customers don’t mistakenly dispute legitimate charges.
  • Follow Up on Transactions: For suspicious or large orders, contact the customer directly to verify transaction details. It’s better to double-check. 
  • Stay Updated: The landscape of fraud is evolving and always changing. Regularly update your fraud prevention methods and stay informed about the latest scams and techniques.
  • Review Chargeback Reasons: Regularly analyze the reasons for chargebacks to identify trends and areas for improvement, sometimes it’s your fault. 
  • Participate in Networks: Engage with networks like the Verified by Visa or MasterCard SecureCode programs, which add an extra layer of protection. It won’t hurt and adds extra credibility to your business. 
  • Hire Experts: If you’re dealing with a significant volume of transactions, it might be beneficial to hire or consult with experts in fraud prevention.
  • Engage with Chargeback Mediation Services: Some payment processors offer mediation services that can help resolve disputes before they become official chargebacks.

What else is there to prevent chargebacks?

It’s important to understand and remember that it’s not only about preventing fraud but also ensuring that genuine customers have a smooth and positive experience. Balancing security with ease of use is the key to maintaining trust and reducing chargebacks from your clients.