News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Before and After the Storm; 5 Ways to Prepare For the Holidays and Follow up After

Before and After the Storm; 5 Ways to Prepare For the Holidays and Follow up After

By Karisse Hendrick, Editor-at-Large,

Guest Perspective: The Hidden Problem of Friendly Fraud The candy corn has been replaced by candy canes and mall Santas everywhere are getting their red suits trimmed with white fur out of storage. The holiday season is just around the corner and CNP merchants are gearing up for more Web traffic, more packages being shipped, more payments being processed and more opportunities for fraud. Black Friday, the traditional start of the holiday rush in the U.S., is two weeks away and, while that doesn’t seem very far away, it’s just enough time to make a few changes to your business to that will leave you better prepared to face the coming onslaught.

1. Review your current processing fees

While the interchange fees you pay to the card networks and issuing banks cannot be lowered or negotiated, the payment processing fees you pay to your merchant processor can be. Many merchants don’t realize increased sales volume or average ticket size can qualify their business for a lower processing rate. Some processors schedule annual assessments with clients to review and adjust their fees, but many do not. Initiating this process now, before your processing volume increases even more, could equal massive savings for your business. If you are unsure of the rates you may qualify for or want help negotiating, consider contacting a consultant or advocate to handle this conversation for you—they typically know the most competitive rates for your business type.

After the holidays: You may wish to have a more aggressive conversation after Jan. 1, and possibly consider a formal Request For Proposal (RFP) process to ensure the rates your processor is charging are in line with the competition. But, contacting your current processor now could lead to big short term wins. It helps to know their most competitive rate when talking to other providers later. Additionally, tracking the fees you would have paid vs. the newly negotiated fees over the holiday season can be a powerful metric when discussing your performance review next year!

2. Take steps to reduce “friendly” fraud chargebacks

Friendly fraud chargebacks occur when customers participate in a purchase, but dispute the transaction with their credit-card issuer. Friendly fraud occurs when customers regret a purchase, don’t recognize a charge on their statement, claim they didn’t receive an item they purchased or the item they received was not as described on the Website. It’s nearly impossible to determine which consumers are most likely to file a chargeback for these reasons. It is possible, however, to act in ways that reduce that likelihood. Use these two weeks to “friendly-fraud-proof” your business. Review your site to ensure accurate product descriptions. Make sure the company description that shows up on credit-card statements is easily recognizable as your company. Make it easy for customers to contact customer service. Consider requiring signatures for deliveries on purchases over a certain dollar value and log the tracking information for each order in that customer’s account. Also, ensure customers are reminded of their purchase through order confirmation e-mails and that they get prompt updates regarding any delivery delays. Lastly, review your company’s terms and conditions to ensure they reflect current customer-service practices and policies and that the customer clicks to accept these prior to making a purchase.

After the holidays: If you followed the steps above, you will have ample proof in the event of a chargeback that the customer was aware of the purchase, received the item and agreed to your terms and services. Provide this information when responding to friendly fraud chargebacks to maximize the potential of winning the chargeback and getting that revenue back. Continue to track chargeback volume and reflect in your team’s metrics when chargebacks drop and when they are won.

3. Create an alliance with the marketing department

Marketing campaigns drive holiday traffic for specific retailers at specific times. Coordinate with your marketing department to get access to the sales and promotion calendar. Knowing which days will generate the highest traffic will help you schedule manual-review staff and prepare you to process and ship orders as quickly as possible. Big sales events also might be an opportunity to adjust fraud screening rules: behavior that might appear risky for regularly priced items may be completely normal if there is a reduction in price. On the other hand, if you are afraid deep discounts or a specific campaign may attract fraudsters, it may be tempting to try to alter or stop a campaign if you have advance notice. Your concern for the company’s bottom line may backfire, resulting in your marketing department cutting you out of the loop in the future. Instead, consider tracking the fraud rates (both sales prevented and sales that later result in a chargeback) to review with the marketing team after the craziness of the holiday season has died down.

After the holidays: Use reporting to tie chargebacks to specific marketing campaigns so you can give anecdote-free feedback. Continue to build rapport with cross-department teams, especially the marketing department. Over time, your input may be valued and listened to when creating promotions. Though tempting, try not to say “no” or be too negative while building the relationship. It’s better to know what’s coming, even if it scares you, than to be surprised.

4. Review current reporting metrics and consider adding a few more

Having the right reports available at any given time during the busiest time of the year will lead to more informed decisions when they need to be made quickly. Authorization logs will help you track abnormal increases in declines, and being able to track decline reason codes can indicate an issue beyond customers going over their credit limits. Tracking the percentage of orders automatically declined or accepted, the percentage sent to manual review and manual-review acceptance and decline rates also provides insight that can be translated into action. If a high number of orders are being automatically declined, for example, you may want to dive into the details to determine if fraud attempts have increased or if the rules are too tight, resulting in good orders being canceled. If the rate of orders being sent to manual review is too high for your team to keep up with, it may make more sense to increase the risk threshold rather than risk inconveniencing good customers. Making decisions to change rule settings or manual-review requirements quickly is key especially as customer’s expectations of receiving goods quickly increases around the holidays. If these reports are only pulled at the end of the month, you may have missed out on thousands of sales that were canceled overzealously.

After the holidays: Review all reports including reports that track chargebacks to gain insight into how the holidays were managed and what can be improved upon in the future. Daily reports assist in making quick, strategic decisions. Monthly reports help to create larger, long term strategies while also informing other areas of the business on the health of the payments and fraud department.

5. Become best friends with the customer service department

The customer service department of a CNP retailer is the eyes and ears of the organization. They’ll be the first to know if there is an increase in customers claiming their orders were canceled inaccurately or if customers’ accounts are being taken over. They also will be the ones who are contacted by the bad guys, looking for information that will make them better fraudsters. Work with customer service to create tracking that measures spikes in calls related to fraud or payments. Generate a script or list of items that customers should never be told, such as criteria for canceling orders. Create a streamlined process enabling customer service agents to access the fraud department for escalated issues or questions. When fraud and customer service departments work together in a more integrated fashion, processes are streamlined more, issues are escalated less, customers are happier and fraudsters are less informed and easier to identify.

After the holidays: Continue to be aligned with the customer service department. Hold a training session to explain more about the fraud team and the issues or calls you need to know about most. Work with them and train them to look for anomalies and risky behavior you may not have visibility into. This can also lead to a candidate pool for future openings on a fraud review team.
Take full advantage of the time left. Over the next two weeks, work you do to review and streamline processes, begin to form alliances in other departments within your company and lay the groundwork for lower fees will lead to greater preparedness for the busiest, most hectic time of the year. And, after the sales have run their course and all returns to normal in 2016, that work will have helped identify areas to improve.

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Daniel Leibovitch