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Payment fraud and handing disputes

Fraud and disputes are reasonably rare, but they do occur occasionally in the world of e-commerce. The first step to prevention is to know what type of fraud and dispute you're dealing with.

What is fraudulent payment?

A payment is considered fraudulent when the cardholder did not authorise it. Most fraudulent payments are made using stolen credit cards. When a cardholder is notified that the payment has been made or they review their card statement, they contact their card issuer to dispute it.

The most common type of fraud is chargeback fraud. This type of fraud occurs when a customer charges back on their credit card for a purchase they made online, without any legitimate reason.

How does payment fraud impact your business?

Usually, most of the fraudulent payments will lead to disputes. A dispute (also known as a chargeback, inquiry, or retrieval) occurs when a cardholder questions the payment with their card issuer. For some reasons, if you lose in a dispute, you will have to refund the total payment amount, along with dispute fee.

Preventing disputes and fraud

Disputes and fraud are an unfortunate aspect of accepting payments online and the best way to manage them is to prevent them from happening at all. Here are some recommendations that you can do:

1. Use Stripe as your payment processor

Stripe is a first and foremost payment processor in VaocherApp. They have different inbuilt tools and services not only to help you accept payments with ease, but also protect you from fraud. Following are a few reasons:

  1. we follow all their best practice to ensure the maximum security when handing online payment
  2. they implement AI and powerful machine learning algorithms to help detect and block fraud for any type of business
  3. they help you distinguish fraudsters from customers by applying "rules" to high-risk payments

You can read more about how Stripe can help you to combat fraud here.

Enable 3ds payment using Stripe Radar
Set rules to prevent payment fraud

2. Enforce card authentication (3D Secure)

For extra fraud protection, 3D Secure (3DS) requires customers to complete an additional verification step with the card issuer when paying. In Europe, the Strong Customer Authentication (SCA) (read more here) regulation requires the use of 3DS for card payments. Even through it is optional for other countries, but you can still use it as a tool to reduce fraud by ensuring all transactions will be authorised by the real cardholder, and probably shift liability as well.

By default, payments will request 3D Secure authentication if the card requires it. You can change to "always request 3DS" in VaocherApp Settings → Payments → Stripe so that all payments from cards that support 3D Secure will request 3D Secure authentication.

Request 3d secure in online payment
Set to "Always request 3DS"
⚠️ Note: 3D Secure is bound to the card issuer (e.g. the bank). That means even you've enabled 3DS in Stripe, if the card issuer does not support 3DS or the cardholder is not enrolled in 3DS, payment won't go through additional authentication.

3. Collect as much information as you can

It's highly recommended that you collect as much information as you can when someone comes and redeems a gift voucher, either in-store or online. Depends on your circumstance, sometimes it is not convenient to do so. However, this extra info would help you to win a dispute and avoid losses.

We have a blog post here explaining what you can and should do.

4. Opt-in for Stripe's Chargeback protection

Stripe's Chargeback protection defends your business from the unpredictability of disputes. If your business faces a fraudulent dispute, they will cover the disputed amount and waive any dispute fees, no evidence submission required.

How can VaocherApp help?

We always implement the best practice in VaocherApp system to ensure data safety and security. We partner up with trustworthy payment providers to handle the online payments and minimise the risk of fraud. We do all of that so you can focus on growing your business.

Payment fraud are in fact reasonably rare, but they do occur occasionally. If that happened to you, don't hesitate to contact us.

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Published on February 3, 2022

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