E-commerce has grown exponentially in recent months, providing a way for merchants to stay afloat amid the throes of the ongoing pandemic. Unfortunately, along with that growth comes an increase in fraud and chargebacks.  

To talk about what online merchants need to do to manage and prevent chargebacks and fraud, PaymentsJournal sat down with Scott Adams, VP of Friendly Fraud at Kount and Raymond Pucci, Director of Merchant Services at Mercator Advisory Group.

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Merchants are shifting to e-commerce….

Currently, there is an influx of merchants new to e-commerce. This stems from the fact that brick-and-mortar merchants largely closed in-person operations when the pandemic started spreading in the U.S. in March. When that occurred, e-commerce became many businesses’ only option for survival.

While some businesses have since reopened, consumers remain wary of shopping in-store and feel safer conducting their commercial activity online. This will ring true throughout the upcoming holiday season, during which less than half (43%) of consumers plan on conducting the majority of their shopping in-person.

…Which makes them vulnerable to fraud

Sophisticated fraudsters recognize the opportunities that come with newly online merchants and are eager to capitalize on any lapses in security. Even so, not all merchants recognize fraud as a threat.

“Now, all of the sudden, [e-commerce] is the only way to do business,” explained Adams. “So you have merchants that don’t understand fraud or think they won’t be defrauded coming online.” Rather, they’re thinking about how to sell their products. “In most cases, [merchants] don’t even think about fraud until it’s too late,” he added.

Friendly fraud is costly for merchants

It’s important to note that it’s not only professional fraudsters that pose a threat: friendly fraud does, too. Friendly fraud occurs when a consumer conducts a transaction, then gets their money back by claiming they never made the purchase, didn’t receive the product, or only received a portion of their order.  

While friendly fraud can be attempted by a customer trying to “cheat the system,” it’s not always intentional.