Fighting Credit Card Fraud: How Chargeback Prevention Services Can Help

Credit card fraud isn’t just a common type of fraud, it’s an entire field of numerous different types of fraud that all fall under this umbrella term. Worse yet, new kinds of credit card fraud are invented and developed every year. In many cases, people haven’t even heard of some of the newer types of credit card fraud out there, yet are often falling victim to it regardless. For example, you’ve probably heard of phishing scams, as they have been around for years, but many people haven’t heard of vishing or smishing scams.

On the other hand, many old types of fraud are still very much in play too, even though they are well-known and many payment processes are actively employing detection and prevention methods against them. Fraudulent chargebacks are one such example, as people still practice this scam, and it can often bypass even sophisticated chargeback prevention methods.

In this ever-changing landscape of fraud and scams, using a good fraud prevention service is essential. Fortunately, not only are there good security-minded payment processors out there, but many fraud detection and prevention methods out there work on various types of fraud too. For example, here’s how chargeback prevention services can help in fighting credit card fraud of other types too.

How do chargeback prevention services work?

Different payment processors have different chargeback prevention tools. If we look at some of the best and most secure payment processors out there, however, they are preventing chargebacks through a complex combination of:

1. Real-time traffic monitoring

By employing machine-learning algorithms to constantly monitor financial traffic, the payment processor is able to pinpoint and analyze common chargeback triggers and learn when and how chargebacks occur.

2. Early detection

By knowing when and how chargeback occurs, the payment processor is able to detect fraudulent chargebacks and differentiate between them and actual chargeback disputes. This early detection then allows the processor to take proactive measures to prevent fraudulent disputes.

3. Dispute resolutions

Good customer support and dispute resolution are key for both combating fraudulent chargebacks and efficiently dealing with regular chargebacks without leading to overwhelming financial loss.

How do chargeback prevention services help fight other types of credit card fraud?

Now that we know how chargeback prevention works, the next question is how can that even help against problems, such as card testing fraud, application fraud, social engineering fraud, identity theft, and other scams? There are many different types of credit card fraud, after all, and each necessitates different prevention methods. That’s true, but it’s also true that there is some overlap between the different fraud prevention methods. For example, good encryption and tokenization work against most types of transaction and credit card fraud.

Similarly, proper transaction monitoring and analysis tools work not only at detecting chargebacks but for pinpointing other types of fraud as well. Such monitoring and detection algorithms are a must against scams, such as:

• Synthetic identity fraud – AI-powered fraud that creates a fake persona that’s trying to leave a believable digital footprint before attempting fraudulent transactions.
• Pattern mimicry – uses machine-learning algorithms to mimic normal customer behavior.
• Adversarial attacks – attempts to circumvent and neutralize a payment processor’s own AI-detection tools.
• Counterfeit card fraud – creates fake credit or debit cards using personal details from previous phishing or data breach hacks.
• Card testing fraud – tests different random card numbers with small transactions in an attempt to find a real card number that can later be used for a large-scale transaction.

Chargeback detection and prevention algorithms are good against all of the above and other types of credit card fraud simply by virtue of monitoring and analyzing transactions and customer behaviors to find behavioral inconsistencies. There is no surefire way to prevent 100% of credit card fraud, of course, as some are even directly designed to neutralize AI-detection tools.

However, payment processors with good machine-powered detection algorithms are a great way to reduce most types of credit card fraud. Together with other security tools, such as encryption and tokenization, chargeback prevention services can be of great help in reducing the financial drain on your business that comes from credit card fraud and other cyberattacks.