What is friendly fraud and how do chargebacks work?
A culture of chargebacks and ‘friendly fraud’ is hitting businesses of all shapes and sizes where it hurts the most. How can managers and CEOs combat against an evolving consumer chargeback philosophy, protect their profits and keep markets happy at the same time?
First of all, it’s worth reminding yourself of how chargebacks work and why they’re completely necessary. Chargebacks are entirely legal, offer consumers more security than cash transactions and offer a degree of protection against fraudulent companies, especially faceless ones that operate exclusively online.
Only, there has been significant growth in the amount of retail chargebacks over the past couple of years with people seemingly abusing how chargebacks work. They have increased by 20% per year according to research, while the practice of ‘friendly fraud’ has risen by an incredible 41% in two years.
How do chargebacks work and how can I prevent friendly fraud?
That can present an enormous headache for financial managers and CEOs looking to reach the next stage of their growth. How do chargebacks work and fit in to a business’s long-term growth strategy if they’re continually, unfairly targeted and profits are leaving the company as fast as they’re coming in?
Getting the balance right is key; working against a customer every time a chargeback is issued is ill-advised and can damage your company’s reputation. Remember, not every chargeback is a malicious attempt to dupe a business.
Not preparing well enough in regard chargebacks though and having an out-of-date transaction policy can see their frequency potentially increase and hit your growth ambitions.
Working with an experienced payment services provider can help you to implement a modern, effective and legally-compliant chargeback policy as well as introduce modern technology that streamlines and optimises the way your business operates financially.
New chatbot software, for instance, is constantly being tested and trialled that fintech specialists believe could save businesses more than £80 billion in chargeback-related claims. How? By automating the customer service process to deal with customer complaints efficiently and reliably to resolve conflicts and build better relationships with people.
Be clear about how your business handles chargebacks
While new technology is helping to combat a growing chargeback culture, the opposite is also true. Disputing a purchase is now easier than ever before for consumers, with some software going as far as completing a chargeback within minutes of a button being pressed.
For many financial managers and CEOs, chargeback culture looks like something that’s impossible to tackle, especially when chargeback tips are circulating around social media sites encouraging people to abuse the service to get things for free.
It’s easier than you think to combat chargeback culture, and by implementing the right compliance strategy as well as streamlining the way you process payments with modern software, businesses can save themselves time and vastly reduce the amount of chargeback requests they get.
Though a chargeback and fighting friendly fraud can be a complex procedure, having the right process in place can improve results and keep your profits safe.
Find out more about friendly fraud and how to handle a chargeback request in the right way with a Fibonatix specialist who cares as much about growing your business as you do. Contact us to find out more.