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Sometimes transactions don’t run smoothly, and a cardholder files a dispute for a given charge, requesting the card issuing bank to reverse the paid amount. This is also called a chargeback.
Why do cardholders file Disputes?
Some common reasons for cardholders to file a dispute include:
- Item was not received
- Item received was not as described
- Recurring charge was not canceled as requested
- Charge was duplicated or product/service paid for by other means
The above constitute reasons for a commercial dispute, where the customer approved the charge, but is not happy with the provided service or goods received. If the cardholder did not authorize the charge (for instance, because the card was lost or stolen), then it is called a fraud dispute with the following reason:
- Charge was fraudulent
This is one of the most common reasons for disputes.
Disputes are often initiated by cardholders. But when it comes to lost or stolen cards, the bank may automatically file a dispute on behalf of the cardholder.
Fraud Monitoring and Control
Every charge processed by us is assessed, controlled, and monitored.
- Onboarding: Where fraud is more likely, for example, you are selling items that can be resold easily, we require cardholder authentication (3DS) for all charges.
- Pre-authorization: To ensure the customer is in possession of the card, we authenticate the card number using the cards CVV value as well as the card’s billing address, if available. For US, UK or Canadian cards, this uses the Address Verification System (AVS).
- Tokenization: To reduce the risk of credit card numbers being disclosed, which could amplify fraud, we tokenize credit cards.
- In-Transaction Risk Analysis: For all charges, we analyze multiple factors to determine if it is likely fraudulent. Depending on the analysis, this could result in blocking the charge or dynamically requiring 3DS. Charges blocked this way will show the error code
failed_fraud_check. The solutions include:
- Velocity check of charges from the same card. We prevent the use of the same card for payment many times in a row as this is often done by criminals to empty an account of a stolen card.
- Velocity check of charges from the same IP or same IP geolocation
- Higher or lower than expected charge amounts
- Risk scores based on transaction behaviour analysis
- Transaction Review: We employ an additional set of measures to detect potential fraudulent charges after they are captured, to improve risk controls and thresholds or to block specific abusive cards or customers from using us as their payment processor. These measures include failure pattern detection and anomaly detection. Settings and thresholds vary from merchant to merchant and are set at our discretion. Settings are monitored and regularly updated.