Will Europe Digital Single Market increase fraud and chargebacks?

The European Commission announced in 2014 its intention to create a Digital Single Market across EU member states. Designed to unlock barriers to a EUR 415 billion growth opportunity, the Digital Single Market aims to provide

European consumers with better access to digital goods and services—and in turn, unlock new earning potential for merchants.

Legislatures and policy makers claim the creation of a Digital Single Market will benefit everyone involved. However, the reality is that many merchants will embrace new sales opportunities without fully understanding the associated risk.

Fraud exposure will increase once geo-blocking is removed

One of the main objectives of the Digital Single Market is to remove barriers between member states—primarily, geo-blocking policies that many merchants currently choose to employ.

Geo-blocking gives merchants the right to reject purchases from certain countries, usually based on perceived risk exposure associated with the region.

By removing geo-blocking and encouraging cross-border sales, the Digital Single Market essentially implies risk exposure is universal across the continent. At least, that’s how merchants are perceiving the regulations.

In reality, fraud exposure and chargeback triggers are unique to each merchant, and subsequently need personalised mitigation tactics. However, sufficient proactive management strategies will likely be forfeited for several reasons:

• Merchants will hastily be lured into new customer demographics by the promise of greater earning potential without thought to possible risks.
• An insufficient understanding of region-specific threats will prohibit merchants from recognising and preventing fraud.
• Merchants will be incentivized by the perceived “all-or-nothing” philosophy—either enter regions that are perceived as risky or sacrifice the entire European market.

Not only could the Digital Single Market increase risk exposure for each individual merchant, threats will increase across the entire continent. While it is possible to regulate merchants’ selling practices, it is impossible to normalise consumer behaviours.

European friendly fraud is already increasing at an alarming rate. Chargebacks911 has found certain industries are experiencing as much as 50% YoY growth in the UK, France, and Germany—that has now surpassed US cardholder activity.

Merchants in countries with less ecommerce penetration will suddenly be assaulted with this previously unexperienced phenomenon. Because they have neither proactive strategies nor reactive coping mechanisms, this faulty consumer behaviour will not be challenged. And studies have shown that 40% of successful friendly fraud attempts will result in another illegitimate chargeback within 90 days.

Unchecked friendly fraud will simply perpetuate the problem, increasing the threat for everyone in Europe.

What Needs to be Done?

In its current state, the European Digital Single Market threatens to increase uncertainty, rather than streamline processes as originally intended.

It is imperative that businesses recognise the upcoming challenges and create appropriate management strategies. The most effective efforts will be those that draw on professional expertise.

Chargebacks911 was created in direct response to the emerging challenges of a dynamic environment. We have established procedures, technologies, and expertise to help merchants remain agile in a constantly evolving marketplace.

Rather than wait and see what threats might result from proposed policy changes, Chargebacks911 will identify the anticipated chargeback triggers that will plague a merchant’s unique business model and create proactive strategies to get one step ahead.

The Digital Single Market will cause earning potential to skyrocket—but fraud and chargebacks will surge too. Are you prepared?

About Monica Eaton-Cardone

Monica Eaton-Cardone is an international entrepreneur who provides sustainable revenue retention and risk reduction solutions to the eCommerce environment. She is the co-founder and COO of Chargebacks911, the global leader for chargeback management.

About Chargebacks911

Chargebacks911 is an award-winning chargeback management service provider, on the cutting edge of risk mitigation technology innovation. The company specialises in helping merchants minimise their risk exposure by mitigating friendly fraud to ensure optimum profitability and longevity. Chargebacks911 is a Global Risk Technologies company and works to expand the brand’s global outreach efforts with standardised, efficient dispute management solutions developed for merchants, acquirers, and issuers.