Credit Card Fraud
| Category: Online Payments | Date: 2003-10-23 |
Yes your old employers are speaking, global merchants, the people you once solicited to push your business venture. "Never will the credit card replace cash," it was said, but, on the backs of merchants, this was proved to be wrong.
So, where are you now? The online merchants are experiencing a global problem - Chargebacks. It was a drop in the ocean when it started but has since turned into a raging torrent of global banking losses.
Chargebacks are what a business receives from their bank when a credit card holder denies knowing the merchant who has appeared on their credit card statement, or, when the card is found to be fraudulent, in which case the bank has introduced a process of reclaiming this debt from your bank account, being that the responsibility lies solely with you .
Major banks around the world took their time, but eventually joined credit card companies, in bringing the world nearer to a cashless society. High fees were introduced to cover every issue, fees that increase at a rate comparable to the decline of interest in merchant problems. Once card companies and banks had sealed this relationship they ensured the path to a cashless society, and by default, had laid the way open for trade online.
Banks pushed credit cards, then endured telephone orders, set-up ATMs, then flirted at online banking. Major banks have now embraced full time online trade, using secure websites, electronic signatures, address verifications, local gateways, and finally sights ahead to the International gateway. This is the next step in the revolution, NO credit cards, minimal fraud, verified passwords, digital signatures, and a global banking platform providing merchants with a secure stage as the optimal market place.
Unfortunately, the credit card dinosaur has not improved its services with time, it has only ridden on the opportunity wave, increasing its membership, upping its fees and filling its coiffeurs. Credit card security services are non-existent; in most cases there is no separate department. The alliances with the banks are rotting with age and neglect, agreeing in the past to take responsibility for chargebacks due to fraud on the telephone, but no responsibility what so ever for fraud on the Net, they found a way out of the original mistake.
Chargebacks were originally introduced to help customers fight the fraudulent use of their cards, but many customers are abusing this service claiming chargebacks fraudulently, based on product or service dissatisfaction, yet still in some cases, retaining the product, and for a while, the service.
The credit card holder commits fraud when initiating a chargeback knowing full well that what they declared was a lie. On the average Bank chargeback form, there is only a choice of TWO declarations:
That, the cardholder does not know the merchant on the statement, thus questioning the transaction, and
That, the card was not in their possession at the time of purchase.
The second reason is TOO dishonest for the most law-abiding citizens, so the other box, which is less naughty, a little lie, eases the conscience, it is the one regularly used to initiate fraudulent chargeback. The cardholder declares no knowledge of the merchant, and with relatively no effort and zero comeback from the credit card company, their bank initiates this fraudulent act, by default, becoming a party to it itself. Once the process starts the merchant can almost guarantee a final loss, even though the bank has a process of appeal, a date to respond and a time period for when the amount will be debited, if the final decision is in favour of the cardholder.
There is a hue and cry around the world about chargebacks and the stolen credit card...BUT there is a bigger problem gaining momentum, clients are being assured by default, that they can use the chargeback system to get a refund on their goods and services if they are dissatisfied, almost guaranteed.
With experience, Glopro has very little loss incurred due to stolen cards or card abuse, usually prevented by getting an authorisation for every transaction, unfortunately though, we have experienced an increase of over-confident VISA using clients (very low in MasterCard, never yet with AMEX nor Diners Card), threatening to chargeback fees. These threats include backdating chargeback fees up to and including the past twelve months; try THAT if you want real fraud. VISA and the banks accept this backdating as part of their process where other cards have stopped this unless there is overriding proof.
What can merchants do to combat this problem? Nothing. You cant do a thing!
You may go through all the processes, reply before the date specified; send all information you can: electronic forms written by the account holder, terms and conditions, signed statutory declarations from your staff as to the identity of the card holder, phone conversations etc; even complain all the way up to the Manager of Card Operations; or complain to VISA if you can find their head office telephone number anywhere.
But, as stated in an article on MSNBC.com - "Credit card fraud has become a nightmare for e-merchants", written by Julia Angwin, Wall Street Journal... Visa International says it decides on a case-to-case basis, but concedes its hard for merchants to prove their case without a signature. VISA Internationals Dave Richey, vice president of card operations, USA says "A signed, imprinted sales draft is darn good evidence and will win just about every time." REALLY? You dont say Dave! Forget the Internet phenomenon, the billions of dollars in profits you have squeezed out of it and the advances made in international online trade, he suggests by this remark that we ask the client to either fly over to us, or mail the card, very forward thinking Dave.
Finally, if you havent already decided to turn away from business online and the willingness to endure the lack of support from your bank and the credit card company, spare a thought for these little titbits from the same article, as above, presented by Julia Angwin.
Register.com - won very few fights with the credit card companies over charge backs, they created a reserve of 2% income for chargebacks.
Bluefly.com has 2% of sales as chargebacks
Efunctional.com have two out of seven staff devoting their whole day to checking for fraud. Even so they still have two or three chargebacks a day, with losses such as $3000 to $4000 in one week.
Expedia Inc. travel website founded by Microsoft Corp, took a $4.1 million write-off in disputed charges
(I wonder what percentage of these figures were chargebacks initiated due to bloody mindedness and card holder fraud. If our experience is anything to go by, probably most of them.)
To date, we have complained to our bank, all the way to the top of Merchant Services. We made an official complaint to VISA International, who in turn replied back after a week with instructions on how to fill out and send a complaint by fax!, and suggestions how to further waste our time on these issues. We have also talked to other banks.
On line though we are in the process of placing preference signs to our prospective clients. We are going to offer a percentage reduction to people paying for fees or products using these credit cards AMEX, Diners Card and MasterCard. With this we should be able to bring our chargebacks quantity down by nearly 100%. At least this may encourage credit card companies to get their act together if they see a serious depletion in their profits, as this appears to be the only language they know.
Beware! If you havent experienced this yet... YOU WILL!!!
About the Author
To contact see details below.
webmaster@allnetpromotion.com
http://www.gblast.com/mnews/mnews3.htm
So, where are you now? The online merchants are experiencing a global problem - Chargebacks. It was a drop in the ocean when it started but has since turned into a raging torrent of global banking losses.
Chargebacks are what a business receives from their bank when a credit card holder denies knowing the merchant who has appeared on their credit card statement, or, when the card is found to be fraudulent, in which case the bank has introduced a process of reclaiming this debt from your bank account, being that the responsibility lies solely with you .
Major banks around the world took their time, but eventually joined credit card companies, in bringing the world nearer to a cashless society. High fees were introduced to cover every issue, fees that increase at a rate comparable to the decline of interest in merchant problems. Once card companies and banks had sealed this relationship they ensured the path to a cashless society, and by default, had laid the way open for trade online.
Banks pushed credit cards, then endured telephone orders, set-up ATMs, then flirted at online banking. Major banks have now embraced full time online trade, using secure websites, electronic signatures, address verifications, local gateways, and finally sights ahead to the International gateway. This is the next step in the revolution, NO credit cards, minimal fraud, verified passwords, digital signatures, and a global banking platform providing merchants with a secure stage as the optimal market place.
Unfortunately, the credit card dinosaur has not improved its services with time, it has only ridden on the opportunity wave, increasing its membership, upping its fees and filling its coiffeurs. Credit card security services are non-existent; in most cases there is no separate department. The alliances with the banks are rotting with age and neglect, agreeing in the past to take responsibility for chargebacks due to fraud on the telephone, but no responsibility what so ever for fraud on the Net, they found a way out of the original mistake.
Chargebacks were originally introduced to help customers fight the fraudulent use of their cards, but many customers are abusing this service claiming chargebacks fraudulently, based on product or service dissatisfaction, yet still in some cases, retaining the product, and for a while, the service.
The credit card holder commits fraud when initiating a chargeback knowing full well that what they declared was a lie. On the average Bank chargeback form, there is only a choice of TWO declarations:
That, the cardholder does not know the merchant on the statement, thus questioning the transaction, and
That, the card was not in their possession at the time of purchase.
The second reason is TOO dishonest for the most law-abiding citizens, so the other box, which is less naughty, a little lie, eases the conscience, it is the one regularly used to initiate fraudulent chargeback. The cardholder declares no knowledge of the merchant, and with relatively no effort and zero comeback from the credit card company, their bank initiates this fraudulent act, by default, becoming a party to it itself. Once the process starts the merchant can almost guarantee a final loss, even though the bank has a process of appeal, a date to respond and a time period for when the amount will be debited, if the final decision is in favour of the cardholder.
There is a hue and cry around the world about chargebacks and the stolen credit card...BUT there is a bigger problem gaining momentum, clients are being assured by default, that they can use the chargeback system to get a refund on their goods and services if they are dissatisfied, almost guaranteed.
With experience, Glopro has very little loss incurred due to stolen cards or card abuse, usually prevented by getting an authorisation for every transaction, unfortunately though, we have experienced an increase of over-confident VISA using clients (very low in MasterCard, never yet with AMEX nor Diners Card), threatening to chargeback fees. These threats include backdating chargeback fees up to and including the past twelve months; try THAT if you want real fraud. VISA and the banks accept this backdating as part of their process where other cards have stopped this unless there is overriding proof.
What can merchants do to combat this problem? Nothing. You cant do a thing!
You may go through all the processes, reply before the date specified; send all information you can: electronic forms written by the account holder, terms and conditions, signed statutory declarations from your staff as to the identity of the card holder, phone conversations etc; even complain all the way up to the Manager of Card Operations; or complain to VISA if you can find their head office telephone number anywhere.
But, as stated in an article on MSNBC.com - "Credit card fraud has become a nightmare for e-merchants", written by Julia Angwin, Wall Street Journal... Visa International says it decides on a case-to-case basis, but concedes its hard for merchants to prove their case without a signature. VISA Internationals Dave Richey, vice president of card operations, USA says "A signed, imprinted sales draft is darn good evidence and will win just about every time." REALLY? You dont say Dave! Forget the Internet phenomenon, the billions of dollars in profits you have squeezed out of it and the advances made in international online trade, he suggests by this remark that we ask the client to either fly over to us, or mail the card, very forward thinking Dave.
Finally, if you havent already decided to turn away from business online and the willingness to endure the lack of support from your bank and the credit card company, spare a thought for these little titbits from the same article, as above, presented by Julia Angwin.
Register.com - won very few fights with the credit card companies over charge backs, they created a reserve of 2% income for chargebacks.
Bluefly.com has 2% of sales as chargebacks
Efunctional.com have two out of seven staff devoting their whole day to checking for fraud. Even so they still have two or three chargebacks a day, with losses such as $3000 to $4000 in one week.
Expedia Inc. travel website founded by Microsoft Corp, took a $4.1 million write-off in disputed charges
(I wonder what percentage of these figures were chargebacks initiated due to bloody mindedness and card holder fraud. If our experience is anything to go by, probably most of them.)
To date, we have complained to our bank, all the way to the top of Merchant Services. We made an official complaint to VISA International, who in turn replied back after a week with instructions on how to fill out and send a complaint by fax!, and suggestions how to further waste our time on these issues. We have also talked to other banks.
On line though we are in the process of placing preference signs to our prospective clients. We are going to offer a percentage reduction to people paying for fees or products using these credit cards AMEX, Diners Card and MasterCard. With this we should be able to bring our chargebacks quantity down by nearly 100%. At least this may encourage credit card companies to get their act together if they see a serious depletion in their profits, as this appears to be the only language they know.
Beware! If you havent experienced this yet... YOU WILL!!!
About the Author
To contact see details below.
webmaster@allnetpromotion.com
http://www.gblast.com/mnews/mnews3.htm
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