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Minimizing the Fraud Hangover

posted on: Thu Oct 11 2012

Online retailers know that fraudulent activity has many long-lasting repercussions beyond the immediate financial hit. Certainly fraud is an inherent risk of doing business, even more so in the card-not-present world of e-commerce. But retailers who are hit hardest by fraud also face a more serious financial risk that could decimate their business – and it all starts with the chargeback.

Obviously when a fraudulent transaction happens, the merchant is usually out the cost of the product or service and any related distribution costs. This impact is compounded by its bank or processor, which assesses fees to the merchant for chargebacks. These fees often increase as more fraudulent activity occurs. If the problem is rampant enough the merchant could lose its ability to accept credit cards altogether – essentially putting them out of business. As transaction and sales volume increase during the holiday months ahead, minimizing chargebacks becomes even more critical.

One of our clients, CD Baby, experienced an even more dramatic impact from the chargeback hangover as they were seeing fraudulent activity on both ends of their business model. Retail Solutions Online does a great job of capturing their story in depth, and it is definitely worth a read.

We worked closely with their team to dramatically decrease fraud’s impact on their overall business, not to mention the considerable time their Controller, Christine Barnum, spent on investigating fraudulent transactions each week. Today CD Baby’s chargeback rate is at .07% - considerably below the Merchant Risk Council’s recommended rate of 0.1% and well under the 2.5% CD Baby was experiencing prior to implementing Kount Complete™. Christine also estimates she spends about an hour a week working on fraud-related tasks, a far cry from 40% of her workweek before our solution was in place.

While a certain level of fraud comes with the territory of being an online retailer, Kount can help you establish your own threshold so you don’t have to be crippled by chargeback fees and threatened by the potential loss of payment options. More importantly, our solution frees your valuable time so you can focus on selling more to more people in more places without fraud dictating your future.

Got a story about fraud and chargebacks? Let's Talk.

Don Bush