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innovative thinking: talking trade

Don’t get short-circuited with customer chargebacks

Chargeback remediation specialist Global Risk Technologies co-founder Monica Eaton-Cardone looks at the growing issue of criminal chargebacks, and how to start fighting back


he annual bill for UK retail crime soared to £613m last year – the highest level since records

began, according to the British Retail Consortium’s annual survey. The rise of cyber criminals and sophisticated

criminal gangs “stealing to order” dominates the headlines. Yet, while these are serious threats to

the well-being of UK merchants, including electrical retailers, more insidious types of criminal activity can also erode hard won profits. The phenomenal growth of chargebacks is one such example. The recent figures from Financial Fraud Action

UK reveal that retail financial fraud losses grew by 26% in 2015 versus the previous 12 months. The research further highlights the growth

in payment card fraud, up 18% over the same period to £567.5m; the value of card-not- present (CNP) fraud, including chargebacks, was up 20% to £398.2m. While much attention is given to other

types of fraud and theft, chargeback fraud is a growing trend but many retailers, including those in the electrical business, have tolerated it, however reluctantly. I was myself a merchant and know first- hand the irritation and impact chargebacks have on a business. When I set up Global Risk Technologies in response to the issues my business encountered I discovered I was not alone: chargebacks should not be accepted as just another part of a retailer’s life.

So what is chargeback fraud? A chargeback is a process initiated by a customer to reclaim funds that they did not authorise to leave their account, or recompense for goods that did not arrive, were damaged or were not as advertised. It is the right of a UK consumer to initiate chargebacks to goods costing less than £100. The customer’s bank will generally give

the cardholder credit when he or she initiates a chargeback process. Sometimes the cardholder can be an honest customer who is making a genuine claim, but at

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The problem is, the more fraud perpetrated by consumers, the more businesses need to raise prices to cover for these losses – it can be a perpetual cycle where everyone loses, including genuine customers. You might conclude that the time to fight a

chargeback against a circuit breaker does not make commercial sense and so the loss has to be written-off. However, as an electrical retailer, the market is extremely competitive and margins can be tight. So what can be done? A few quick steps to start limiting vulnerability in your retail business to chargeback fraud include: • Improved customer service – Honest

customers might contact you directly about an issue they have with their order. If your staff do not show concern and present a solution to the issue, the customer will look for a resolution elsewhere, which might be to get satisfaction through a chargeback. A customer service policy that staff have been trained in and is presented clearly on marketing materials are two steps that can be acted upon quickly. • Be responsive – Following on from the

other times the buyer is malicious or criminal in intent. If a customer buys control and automation equipment for example, then claims they did not receive them, they may instigate a chargeback with their bank, rather than contacting the seller for a refund. This is bad news for online retailers because chargebacks would not only cost you the sale price, but also the cost of electrical equipment supplied. A staggering 86% of chargebacks are fraudulent and many consumers often bypass the sellers to file complaints directly with their banks. I believe chargebacks are generally a learned

behaviour and that most electrical buyers do not intentionally attempt to get something for free the first time there is a dispute. However, once they profit from a chargeback, many are tempted to repeat the process but fraudulently. Within our industry this has become known as ‘friendly fraud’.

above point, make sure that any customer issue is dealt with promptly. If a complaint is made outside working hours, clearly state on the website or on voicemail when you will respond to the issue. Remember, customers want a resolution fast and many have no hesitation taking it direct to their chargeback if they feel they are being ignored or if it is an effort to reach you. You do not need to accept chargebacks as just a part of your life as an electrical retailer. It is possible to take effective action and give your business a healthier profit margin. • Monica Eaton-Cardone is the CIO and co- founder of Global Risk Technologies. A passionate educator on the problem of ‘friendly fraud’, Monica is interested in not just raising awareness but explaining practical steps that the industry can follow to reduce the issue of chargebacks. For more information, contact Monica at or visit

July/August 2016

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