Friendly Fraud on the Rise – How to Protect Your Business

NETbilling Offers Enhanced Real-time Dispute Prevention

The COVID pandemic has accelerated the growth of e-commerce sales and has further put brick and mortar retailers in more survival trouble than ever before. As the world and our economies begin to adjust to the new normal, so many consumers have moved away from traditional retail sales and have shifted to predominantly online sales and retail delivery services. Some face-to-face retailers are certainly thriving, but just like online e-tailers, they are seeing a rise in credit card fraud.  With this shift, true fraud and friendly fraud have become an ongoing problem for e-tailers and retailers of all sizes. But merchants and credit card companies are fighting back. Fraud and chargebacks have always been a problem for online merchants and continue to go on the rise and be a major concern for merchants, payment processors, and card brands. This article focuses on “friendly” fraud and the many ways that merchants can effectively combat it, now more than ever before.

What is Friendly Fraud?

Friendly fraud occurs when a customer files a chargeback instead of trying to first obtain a refund from the merchant. Authorized cardholders dispute legitimate charges to their credit cards, pushing the bank to force a refund under the pretense that the merchant made an error, which is primarily not the case. Even well-intentioned customers may accidentally commit friendly fraud because they don't understand the differences between a merchant return and a bank-issued refund, which can be quite costly for a merchant. They assume a chargeback is simply a different way of getting their money back, as a regular return. Other consumers knowingly abuse loopholes in the chargeback rules. These “cyber-thieves” are maliciously attempting to get something for free, ripping the merchant off in the process. Its costs e-tailers millions of dollars yearly. As fraud incidents increase and businesses lose more and more revenue, many merchants wonder if there is anything they can do to prevent friendly fraud. The answer, of course, is a resounding “yes”!

Fraudulent activity is rampant, but there are several steps merchants can take to help reduce incidents, including:

  • Providing rapid and exceptional customer service for purchase inquiries, preferably 24 hours a day (NETbilling offers this service - inquire within).
  • Making sure the billing descriptor is easily recognizable.
  • Using delivery confirmation for shipped goods with tracking numbers.
  • Communicating regularly with customers.
  • Granting returns, refunds, and cancelations when requested.
  • Notifying customers before charging for recurring payments.

These efforts are to reduce friendly fraud will almost certainly have a positive effect. However, they will mostly only address the simple dispute situations that can be resolved without professional assistance. To most effectively combat friendly fraud and protect revenue, merchants need a fast, strong, proactive strategy that can address the problem at any stage of the process. Visa has designed tools to assist, and Mastercard and others will soon follow their lead with real-time dispute resolution. Visa claims their Verifi completed solution will help merchants PREVENT, RESOLVE, & RECOVER. 
NETbilling has a very effective solution in place. We can greatly help assist merchants with combatting friendly fraud through our integrated Chargeback Prevention Services, and much more. 

What Is Visa Resolve Online?

Visa has four known dispute categories: Fraud, Authorization, Processing Errors, and Consumer Disputes. While they cannot be avoided completely, steps can be taken by merchants, acquirers, issuers, and cardholders to reduce them. Visa Resolve Online (VROL) is Visa’s online service dedicated to dispute resolution. It functions as a transmitter and retriever of pertinent information and data related to a dispute. It helps determine which disputes are valid or not by using the data it has gathered. It then compares the following information: Transaction Data, Dispute Category, and the complainant’s responses to the VROL questionnaire. 

For example, if a merchant has already taken action on a chargeback claim by crediting back a disputed charge, the VROL service then flags this claim to invalidate the dispute and prevent it from continuing. Refunds can be pre-handled on the fly. The VROL service is included in the VCR initiative and works with the VMPI tool, which is a plug-in for VROL. VMPI is the acronym for Visa Merchant Purchase Inquiry Program.

The VROL service plays a crucial role under Visa’s new protocol as processors and banks are required to utilize the VROL service in the use of event of a dispute to respond to retrieval requests, get or transmit documentation, and appealing initial results. Everything related to a chargeback must go through VROL. VROL stops invalid disputes by cross-checking with VisaNet to find out if there was a valid authorization and by ensuring that there is a present accurate fraud report.  The first step in getting started with Order Insight is to understand how it works. The process allows merchants to seamlessly share information through VROL to the issuer, and involves the following steps:

VROL Service

All Visa card disputes will be resolved via the Allocation Workflow or the Collaboration Workflow. For the former, VROL service evaluates the dispute’s conditions and will provide an automated decision following Visa rules. For the latter, Visa requires additional information from the merchant via the VROL service for dispute resolution. Before a dispute can be filed, the user must first request a “transaction inquiry” through VROL. Typical cases involve the client wanting to dispute a transaction by contacting their issuing bank. A representative then makes a Transaction Inquiry via VROL, which would then utilize the VMPI network to make a purchase inquiry. The merchant would provide pertinent data via VROL, which would then send a response to the issuing bank to reach a resolution.

NETbilling handles the transmission of the data in real-time to provide the transaction details and hopefully “deflect” a dispute. No integration is needed by the merchant if using NETbilling for processing, thus eliminating costs associated with setting up this service.

What is Visa Claims Resolution Initiative?

Unlike traditional ways of dispute resolution through the antiquated retrieval request and chargeback process, the Visa Claims Resolutions (VCR) initiative is designed to eliminate invalid disputes and, therefore, increases efficiency when it comes to processing and resolving valid disputes. Normally, disputes can take up to 46 days to resolve, with more contentious ones taking up to 100 days or more. With the VCR being an efficient system, it will take less time to process disputes. The normal timeframe of 46 days is reduced to 31 days or less, being settled within one billing cycle, which greatly benefits all parties involved. 

VCR will filter out invalid disputes, or those that don’t meet Visa’s criteria for the selected dispute category. This means merchants will spend less time researching the claim’s validity. The VCR system will also reflect a better customer experience due to the efficiency of dispute resolution. The VCR has numerous benefits for merchants, aside from reducing processing times and dispute volume. It also promotes proactive dispute resolution for merchants via the Visa Merchant Purchase Inquiry (VMPI) service by identifying remediating transactions and receiving real-time notifications of Visa fraud reports that went through Visa Resolve Online. The VCR was also put in place to identify, track, monitor, and promote better customer experience owing to quicker dispute response times and faster resolution. 

How Merchants Can Fight Fraud & Avoid Disputes With NETbilling?

NETbilling merchants can benefit from integrated partnerships that we have created to receive alerts, chargebacks, and dispute resolutions, utilizing our integrated chargeback and dispute importing and reporting. This, in addition to the new VMPI, RDR, CDRN solution as well as our USA-based (in-house) 24/7/365 customer service call center to handle inquiries from your customers via, phone, chat, and email, you will now have all that you need to combat fraud!
NETbilling merchants who have been already using these services have seen a significant reduction in disputes and chargebacks. 

Please note: While the VMPI service is only in place for Visa cards at this time, Mastercard is updating their “Eliminator” suite to include similar tools and functionality, and the other card brands as well.

Current NETbilling merchants: To inquire about adding these services with NETbilling, please send our sales team a message or call our sales department: (661) 252-2456 during regular business hours, M-F, 9 am-5 pm PST. Not yet a NETbilling client? Inquire here about everything that we can do to help your business grow!