CHARGEBACK FRAUD
HOW CAN FLEET OPERATORS PROTECT THEMSELVES? Some basic steps can protect your business from this fraud.
1. Don’t accept CNP transactions, because they offer you no protection. If you absolutely have to accept CNP, establish clear rules for when it’s acceptable and make sure your staff apply them. For example, only allow short journeys / small payment amounts for regular customers. Verify a customer’s photo ID against the name on the card if you can.
2. Tell your customers they can pay in the vehicle with PIN verified transactions. This shifts the liability for fraud away from you and onto the card issuer’s bank.
physical card in their possession. Stolen card information is easily available to purchase online if you know where to look. On average a Mastercard or Visa platinum card will range in cost from $15 to $50, or less when buying in bulk; a large amount of stolen card data can be purchased for between $600 and $5,000.
It is a pure numbers game for the fraudster; how many cons can he carry out on each of the cards in his possession before it comes to light that they have been compromised? With many cardholders checking statements only at the end of a month, he has plenty of time to carry out these sophisticated frauds.
HOW ARE FLEET OPERATORS AFFECTED BY CHARGEBACKS?
When you receive a chargeback notification, you may find yourself hit with a triple-whammy of costs:
1. The chargeback itself (the amount paid to you for the original journey). This will be taken out of your account and refunded to the cardholder.
2. The payment you will have made to your driver. After all, he carried out the work in good faith.
3. The standard chargeback fee from your card payment provider, plus any additional fees levied by the card schemes. This is usually at least an additional £30.
To add insult to injury, fleets with a high number of charge- backs can find themselves stripped of the ability to process card payments at all, or penalised with increased processing rates. Fleets are often surprised to find that they are subjected to extra scrutiny when just 0.65% of their transactions result in chargebacks.
FEBRUARY 2022
3. If using online payments, including in-app payments, make sure your provider is using the latest 3D Secure verification tools to protect every transaction. This requires card payments to be verified by the cardholder and reduces fraud risk.
4. Take your fleet company out of the flow of funds altogether by making your drivers the merchant or a submerchant of a managed payment provider. This allows you to avoid fraud liability while carrying other benefits such as reducing admin reconciliation costs, bank fees, clarifying the self-employed status of drivers and ensuring no VAT liability for your fleet.
CAN I DEFEND A CHARGEBACK?
When you are alerted to a chargeback you will be given some time to defend the transaction, by demonstrating that the transaction was genuinely approved by the cardholder and that the service promised to them was pro- vided. This is very difficult, if not impossible, when a fraud has been committed against you. In the case of a disingen- uous cardholder, you may stand some chance, provided you have kept good records of what has transpired between you both. It helps if you have written email correspondence confirming the customer’s requests, a solid set of Terms and Conditions that the customer has agreed to, and an ability to demonstrate that the customer both approved the transaction and was provided with the service.
HOW CAN I LEARN MORE?
At CabCard, we’ve been protecting taxi fleets from payment fraud for 15 years. We offer a full managed payment service which is completely tailored to the taxi sector. For advice about your situation, call one of our friendly team today on 0203 9555 400.
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