How To Fight Fraud Chargebacks

November 1, 2021

The Bolt Team

Online retailers operating with historically high levels of fraud on their site are unintentionally leaving their businesses at risk. Rampant levels of chargeback fraud can result in unnecessary fees, diminished consumer confidence in your online store, and leave your business at risk of losing your merchant account.

To protect your business, your company needs to make sure you’re taking precautionary steps to minimize the amount of card-not-present fraud on your site. Keep reading to learn about the different types of fraud online retailers commonly face and learn the strategies to help you minimize your exposure to fraudulent chargebacks.

  1. What are chargebacks and how can they contribute to ecommerce fraud
  2. Understanding fraud’s impact on online retailers
  3. Recognizing the difference between true fraud and friendly fraud

Let’s start by reviewing what chargebacks are and their role in ecommerce.

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What are chargebacks and how can they contribute to Ecommerce fraud?

Chargebacks allow consumers to dispute a transaction and receive a full refund. Once the customer’s bank receives a chargeback dispute, they work with the retailer to issue a reversal of funds back to the customer. A chargeback doesn’t need that the customer work with the business to get their money back. The customer’s bank handles reversal of funds on behalf of shoppers.


Chargebacks aim to protect shoppers against unauthorized transactions. Shoppers can simply do a chargeback to get their money back instead of having to go back-and-forth arguing with retailer.How rampant chargeback abuse hurts retailers

How rampant chargeback abuse hurts retailers

Unfortunately, some customers abuse the chargeback process. Once they’ve initiated a chargeback, the customer’s bank will debit funds from the retailer’s merchant account as a reimbursement. The retailer when have to dispute the chargeback and provide evidence that the shoppers was responsible for the order.


The dispute process can be time-consuming. Retailers often have to pull many resources to find the evidence needed to help them win. Retailers are also responsible for covering chargeback fees involved in the process. If you’re a high-risk merchant you can expect to pay an even higher fee.

That’s why it’s so valuable that solutions like Bolt offer hassle-free chargeback management support.

Understanding fraud’s impact on online retailers

High occurrences of fraud and chargebacks can negatively impact your business by cutting into your bottom line. When retailers accept fraudulent fractions on their site, they’re liable for covering the cost of the lost inventory and reimbursing any charges incurred by the fraudsters.
Hidden costs such as lost time and resources managing chargeback disputes can further cut into your margin.

The true cost of fraud:

Chargeback fees

Credit card chargebacks represent a big financial threat to retailers. Your acquiring bank will levy a non-refundable chargeback fee every a shopper issues a chargeback. This fee helps cover the administrative costs associated with the chargeback process. On their own, these fees are nominal but if your site is already dealing with high chargeback rates – these small fees will eventually add up and take a bigger bite out of your earnings.

Resource loss

Spending in-house resources to verify each chargeback or review a suspicious order is time-intensive and not an efficient way to allocate your resources. Your staff needs to ensure that the legitimate cardholder was responsible for authorizing the purchase using their debit or credit card. You could use this time to growing your business or further developing your product.

Merchant account closure

Your chargeback rate plays a role in helping to determine your risk and reliability in the eyes of banks. A 1% chargeback rate is the industry-standard maximum — that equates to one chargeback per 100 successful orders. Anything higher than 1% leaves your business at risk of losing your merchant account. They may even label you as a “high-risk merchant”.

Recognizing the difference between true fraud and friendly fraud

We’ve identified the various ways chargeback fraud can impact your business. Let’s break down the different types of fraud online retailers see.

True Fraud

When online shoppers hear “fraud”, they likely associate an image of a scrupulous criminal using a lost or stolen credit card to make purchases. Hostile account takeovers and identity theft continue to be the two leading causes of true fraud in Ecommerce. In situations where true fraud occurs, it impacts both the customer and retailer.

The customer must file a chargeback request to dispute the unauthorized charges. The retailer has to cover the costs of the lost goods and any chargeback fees.

Tactics to help curb true fraud on your site: Your business should take extra precautions to ensure your site is secure. Following these industry-best practices should help you provide customers with a secure shopping experience. It minimizes the likelihood that you’re processing fraudulent transactions.

1. Make sure that your site is PCI-DSS compliant The Payment Card Industry Data Security Standard applies to all businesses handling sensitive cardholder data. PCI DSS aims to protect users from payment card fraud before it happens. The PCI Security Standards Council enforces this standard. It’s a consortium of leading payment brands including VISA, American Express, and Mastercard.

2. Ensure you’re capturing CVV for each transaction
Requiring Credit Code Verification Value (CVV) helps add another layer of security to the mix. Asking for the three- or four-digit code helps prove that the shopper has the physical card at the time of purchase. Credit card company typically print this on the back of the card.

3. Watch for potential indicators of fraud
Transactions that set off these red flags should warrant a second a review by your team to verify their legitimacy.

  • Orders with large ticket items
    High-ticket items are often the target of fraudsters. Carefully review these transactions. This is especially true if the customer checking out has not previously purchased items from your store.
  • Many orders in short span
    Verify these orders with the cardholder or the issuing back to rule out any instances of unauthorized card use. Another thing to keep an eye out for is seeing if someone is making many orders using different credit cards but shipped to the same address.

Friendly Fraud

Many people don’t know about friendly fraud. But, it also affects millions of retailers worldwide. Unlike true fraud, the actual cardholders often initiate friendly fraud. A shopper might file a fraudulent chargeback on a legitimate purchase in hopes of receiving a full refund. The cardholder isn’t required to return the item, so they’ve essentially netted a free product. Friendly fraud can also occur when an unsatisfied shopper feels that filing a chargeback is the only way to get their money back.


Tactics to help curb friendly fraud:

Your business must ensure that you have ample evidence to help prove that there is something fraudulent going on.

1. Capture CVV and AVS
You can use many of the same security features used to deter fraudsters to deter friendly fraud.

Retailers can’t store CVV codes, which also means that criminals can’t steal them. If a shopper enters a valid code during a transaction, it’s safe to assume that the customer has the physical card in their position during the purchase.

Running a quick AVS check to validate that the billing address matches the one on file with the customer’s credit card company can also help you argue that the rightful cardholder authorized the purchase. This is based on the assumption that a fraudster probably wouldn’t know the account billing address. Retaining this information can also strengthen your chances of winning a chargeback dispute in the case of friendly fraud, since they will help show that the customer fully intended to purchase the product, and filed an illegitimate chargeback.

2. Focus on establishing a good relationship with your customers

Clear and frequent communication with your customers helps them better understand your company’s delivery and return policies, and having a responsive support team increases the likelihood that they’ll reach out with a question first instead of reactively filing an illegitimate chargeback request. Your support team can easily resolve small issues like a questionable charge on your customer’s credit card statement.

Having a support team handy to explain situations like this to your customer can help ease their fears. A customer-centric return policy can also be a powerful deterrent against friendly fraud. Customers don’t have to rely on their bank to get their money back if they know that they can get an easy refund or exchange.

3. Include shipping and delivery information
For some customers, online shopping is still a particularly new and uncertain way to buy. Help calm your customer’s nerves and ease their fears by including all necessary tracking and shipping formation information in your confirmation emails. Have clear timelines around delivery dates to set expectations around when customers will receive their items.

4. Ensure your product pages are up-to-date
Chargeback disputes often arise when customers feel that the product they’ve received didn’t meet their expectations. Update your product descriptors and images to accurately reflect the item your shoppers will actually receive in the mail. Be sure to note all specifications so shoppers are completely aware of what exactly they’re purchasing.

5. Furnish your product pages with user reviews
Product reviews help enrich your product pages with additional insights from past customers. These user reviews can help shoppers better understand the product and help them decide if they really want to make a purchase. These reviews add additional depth to your product pages – helping to increase buyer confidence while simultaneously reducing the likelihood they return an item, or worse, filing a chargeback to get their money back.

6. Lean on technology to help you

Tools like Bolt offer a fraud prevention platform that make it simple to combat all types of fraud. Bolt will also cover 100% of the cost associated with fraudulent chargebacks you might experience.

Chargeback prevention is an ongoing process

Letting chargeback fraud run rampant on your store can impact your profitability and operations. As more shoppers look to ecommerce to complete their shopping requirements, fraudsters and cybercriminals will also seek to capitalize on this growing trend. Retailers who aren’t proactive about chargeback prevention are leaving their businesses at risk.

The tactics and strategies outlined in this post should serve as a foundation to help you better recognize the various forms of fraud that can impact your business and provide some guidance on best practices for minimizing your susceptibility to fraudulent chargebacks. Want to take your online fraud-prevention up a notch? Try Bolt’s fraud offerings and get 100% fraud guarantee and more.

Stop Fraud in its Tracks

Fraud costs retailers millions of dollars in fines each year and even more in long-term reputational damage.

Learn How to Stamp Out Fraud
ThinkShop by Bolt does not constitute professional tax or financial advice. Contact your own tax or financial professional to discuss your situation.