Estimated reading time: 8 Min
Fraud is a widespread behavior in Latin America, it can be observed in different sectors and can manifest itself in different ways, including chargeback, one of the biggest headaches in the E-commerce.
Do you have an online store or are you planning to open one? Surely it's one of the terms you're going to come across the most.
How are the chargebacks? What to do when they show up at your ecommerce? How common are they? We'll look at it next...
Chargeback in ecommerce, the pain of online sales
After selling and delivering the product to the customer, with operational deployment and Logistic What this requires, the last thing you expect, is for the bank to withhold the money from the card payment, claiming that the cardholder does not recognize the transaction and classifies it as Fraud, this event is known as chargeback. Has it happened to you?
To have a chargeback It is something that no ecommerce You want because of the double economic loss it generates: the money from the sale and in many cases the product, not to mention the logistics costs, commissions, etc. In addition to the Fraud, a chargeback may be caused by other circumstances specific to the online store.
Take note of the following situations that generate them:
* The owner of the card does not recognize the transaction as their own, did not authorize it or does not remember having carried it out.
* The user reports their card as stolen or lost, so they attribute the purchase to another person.
* The purchase price was discounted twice.
* Charges were made for canceled subscriptions.
* The user did not receive the product or service.
* The buyer states that the product delivered was not the one he purchased, it is another reference, it is damaged or defective.
* The customer returned the product and the purchase money has not been returned.
* The product was not delivered in the promised time.
When a cardholder files a claim with their bank, they freeze the payment for the purchase for the ecommerce until he studies the case and determines if it exists Fraud or if there was a breach on the part of the business, a process that can last days and in some cases, months.
During this period, the ecommerce you must present proof of the sale and delivery of the product, seeking to demonstrate that the transaction was generated in a favorable manner for the business and the customer.
Depending on the bank's analysis of the evidence presented, the chargeback if you so consider it, seeking to protect the cardholder against Frauds made with your card or failures on the part of the ecommerce.
How common is online fraud?
During the second quarter of 2021, 2,745,738 claims were reported in Mexico for Fraud cybernetic, of which 84 out of 100 were resolved in favor of the user. Internet commerce operations, mobile banking, cell phone payments, internet transactions and individuals and legal entities were included in the study. (Drive).
The presence of Fraud online is so marked, that in the case of ecommerce, according to data from Forbes, 4 out of 10 purchases executed by this channel in Mexico are a potential Fraud. As one of the countries with the highest growth in electronic commerce in the region, it also becomes one of the countries with the highest risk of presenting these crimes.
The theft of a person's identity to carry out transactions in their name and friendly fraud, when the customer requests a chargeback after making the purchase and receiving the product, claiming that they did not carry out the transaction, are two of the most common types of fraud in ecommerce.
Also read: 4 challenges for the adoption of ecommerce in LATAM
Perception of online fraud among Mexicans
According to AMVO studies conducted between 2020 and 2021 with more than 1800 cardholders, where they were asked if they had been victims of Fraud electronic over the past year, it was found that 37% had unrecognized payments on their card, 22% duplicate charges, while 20% were victims of cloning.
Regarding the use of a debit or credit card to make online purchases, 47% of the interviewees experienced refusals of their payment method, of which 32% had to change their card to execute the purchase, which involved additional and expensive steps for processing the transaction.
Chargeback: ecommerce fraud, numbers and more
Studies on electronic commerce, carried out by the National Commission for the Protection and Defense of Users of Financial Services — CONDUSEF and the Bank of Mexico, yielded the following figures on chargebacks in ecommerce:
Between January and March 2021, 309,312,565 purchase requests were generated for authorization, of which 197,811,526 (64%) were approved, of which, were made chargeback to 968,639 (0.49%) worth 787 million Mexican pesos.
For the second quarter of the year, that is, between April and June 2021, 328,320,076 purchase requests were generated for authorization, of which 209,672,655 (64%) were approved, of which, were made chargebacks to 1,043,089 (0.50%) worth 761 million Mexican pesos; in this period the percentage of chargebacks had a slight increase compared to the previous quarter.
As we will see in the following graph, purchase requests submitted for authorization in e-commerce have been increasing quarter by quarter, as has the number of approved purchases.
At the level of chargebacks, the April-June quarter of 2020 was the one with the highest number of cases, representing 0.67% of authorized purchases, while, from October to December 2020, there was the lowest percentage, 0.46%.
Los chargebacks they generate millions of dollars in losses to the owners of ecommerce, who every day are looking for alternatives that allow them to have a higher level of security and support in their transactions, while they are immersed in a constant battle between the anti-fraud systems of financial institutions and the criminals who try to violate them.
Also read: From 0 to Ecommerce, everything you need to know to create your online store
Other interesting figures on fraud and chargebacks in Mexico
* According to Erick McKinney, country manager of Adyen Mexico (global payment platform), the authorization rate for card payments in ecommerce during 2020 it was 52%, rising to 60% in 2021, a figure that, in countries with more secure payment systems, reaches 95%.
* At the Latin American level, according to Blacksip data, the average rate of authorized purchases is 57% and the rate of chargeback is 1.7%. Compared to countries such as the United States where the authorization rate is 89% and that of chargebacks of 0.4%, there is still a lot of growth in the region in terms of control and security systems for online transactions.
* Between January and June 2021, e-commerce payments accounted for 21.1% of total card payments (in traditional merchants and ecommerce). During this same period, of the total number of authorized purchases, 29% correspond to credit cards and 71% to debit cards.
Also read: Online sales, keys to successful ecommerce
Who is affected by ecommerce fraud?
ANDl Fraud electronic is a barrier to the growth of online sales that generates repercussions on different actors:
* In online stores by the generation of chargebacks and product losses. In addition to the loss of customers who will probably not return because their payment method is not accepted. More than products, the ecommerce they sell trust, agility and service.
* In financial institutions, by generating millions of cases for study and making them need to devise new control mechanisms to increase the level of security in transactions.
* In buyers, as their level of distrust increases due to fear of Fraud or increase the difficulty in making the payment, due to security controls.
How to avoid chargebacks in your ecommerce? Effective tips
While fighting against the Fraud electronic is a difficult battle to fight, you can implement certain actions to help you minimize chargebacks In your ecommerce:
1. Purchase payment gateway services that provide you with guarantees and support in the event of Frauds And chargebacks for your business; look for certified security controls to help you protect your transactions and the finances of your ecommerce.
Gateways such as Mercado Pago and PayPal offer anti-fraud insurance and Seller Protection Programs, where, if the bank approves a chargeback Towards the ecommerce, the footbridge covers the chargeback and does not discount the money from the sale to the store, as long as it meets certain conditions.
2. Keep in constant communication with the customer to inform them about the status of their order, or explain any contingency in the delivery, you will avoid asking for a refund of the money for non-compliance.
3. Be as clear as possible in the descriptions and images of the products, you will avoid requests for chargeback for dissatisfaction with the order. In addition, verify that the preparation and transport are carried out in the best way to avoid damage to the product.
4. Inform the customer how your ecommerce on your statement of account, preferably with the name of your brand, so you can remember the purchase and you won't be unaware of it.
5. If you see duplicate charges in the customer's payment, immediately contact the customer and return the money.
6. Keep all the documentation that supports the purchase and delivery of the product, it can help you avoid chargeback.
7. Be clear in your return policies, specifying the refund times. Respond to customer requests or questions in a timely manner.
Fraud and chargebacks They are a reality that is faced by electronic commerce, as the sector continues to evolve in Latin America, so will payment systems, as they have already done in territories such as China, where cash, debit or credit card payments were replaced by payments with QR codes and facial recognition. Can you imagine making your sales using this type of technology?
Avoid the chargebacks It should be a goal in your E-commerce, where one of the key points is the efficient preparation of the product and compliance with delivery times to prevent the customer from requesting a refund of their money. If you are looking for an ally to help you manage your inventory, improve your delivery process, enhance your compliance and customer satisfaction, do not hesitate to contact us, we are the best Fulfillment Center for E-commerce in Mexico and Brazil, just click here. With solutions such as the Fulfillment Queretaro, you can further strengthen your logistics operation, you just have to click Here.
Sources of information:
Ecommerceguide / Condusef / Condusef / Conekta / Expansionmx / Finnovist / Forbes /Adyen/ Cybersource / Portfolio /Openpay/ Mercadopago / UAEM / Blacksip
Rankinslatam / Paypal / Paypal / Elceo
