How automation can support merchants in reducing ecommerce fraud

Monday 9 January 2023 10:35 CET | Editor: Irina Ionescu | Interview

We spoke with Monica Eaton, Founder of Chargebacks911 and Fi911 about the perks of automation and AI that merchants can use in their advantage to efficiently fight ecommerce fraud.

We know that all types of fraud grew during the pandemic, but with the disruptions of COVID-19 largely over, are things back to normal?

Unfortunately, we have seen ecommerce fraud, from organised crime to individual scams grow just as rapidly this year as before the pandemic. One key factor is the economy — ordinary people don’t have enough money and will find ways to plug the gaps in their personal finances. Chargebacks are an easy and very effective way to get something for nothing, so it is no wonder that many of those who first used chargebacks during the pandemic will keep doing so.

If the fraud problem is so extensive, how can merchants keep up?

The one-word answer is: automation. Right from the start of Chargebacks911, we wanted our clients to do as little as possible once their solution was in place. It is impossible for companies to assign staff to check every order or dispute every chargeback claim, so automation must do the heavy lifting.

We can also talk about different types of automation. A simple rules-based sorting system that flags suspicious orders (i.e., those of which use a different delivery address from the billing address) for human intervention might save time but will increase friction on customers, while still requiring a large number of human operators. 

Artificial Intelligence (AI) and Machine Learning (ML) are different, which is why they are at the core of our solutions. They can be much more subtle and intelligent when deciding which transactions are suspicious, and they are able to do more than just reject or accept transactions; they can selectively apply friction in the form of extra verification questions to accounts which might be red flagged.

What is AI able to do to reduce the number of chargebacks?

Chargebacks happen because they are easy and effective. Who wouldn’t want to get a 100% rebate on every big purchase, if given the opportunity? The chargeback success rate is around 68%, so the chances customers will get their money back on a new TV or even vacation flights are fairly good. Of course, many people also commit ‘friendly fraud’ without realising it because they don’t recognise a charge on their card statement or because a delivery is late.

If only 25% of chargebacks resulted in a ‘win’ for the customer, we would see a major drop in fraudulent chargebacks. Automation is how we can get to that point, providing that enough companies are using the right technology.

Many companies have a ‘Law and Order’ approach to resolving chargebacks, where they must determine whether a chargeback claim is legitimate and make a case to the ‘judge’ at Visa or Mastercard. However, card schemes aren’t going through every chargeback claim they get by hand; they are using AI systems which are much easier, cheaper, and more effective for companies.

How is the uptake of AI by merchants likely to change their businesses and the fraud landscape?

The great thing about using AI in your business is that you can tie it into other systems easier than manual entries from humans. This communication between different systems is already used in major companies and more forward-looking smaller businesses, and could become a standard across all merchants.

With Chargeback911’s API or webhook systems you can receive alerts on every new chargeback and be kept up to date on their status. It can also tie in with other systems, including a company’s CRM, providing extended oversight on your outgoings without the need to manually enter data. This could become a gateway for various automated, intelligent processes. In other words, your ecommerce site could ‘know’ that a heavy shopping season like Black Friday or the end-of-year holiday season is coming and add extra security checks on new customers, as they have an increased chance of being fraudulent.

With time, it might even be possible for artificially intelligent systems to do the majority of – or maybe all – of the tasks a management or an admin team does today.


About Monica Eaton

Monica Eaton is the Founder of Chargebacks911 and Fi911. Monica has worked tirelessly to educate merchants and financial institutions about hidden threats in the rapidly changing payment fraud landscape, successfully protecting over 10 billion online transactions and recovering over USD 1 billion in chargeback fraud.





About Chargebacks911

Founded in 2011, Chargebacks911 is the first global company fully dedicated to mitigating chargeback risk and eliminating chargeback fraud. As industry-leading innovators, Chargebacks911 is credited with developing the most effective strategies for helping businesses manage disputes and reduce loss in various industries and sectors within the payments space.

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Keywords: chargebacks, ecommerce, fraud detection, fraud management, online fraud, fraud prevention, merchant fraud, ecommerce platform, artificial intelligence, online payments, API
Categories: Fraud & Financial Crime
Companies: Chargebacks911, Fi911
Countries: World
This article is part of category

Fraud & Financial Crime




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