A Fraud Misconception Consumers Believe
Consumers believe ecommerce purchases offer better security than in-store, despite ecommerce merchants losing billions to fraud annually.
eConsumer Services® highlights a recent study which found that consumers are severely lacking in their understanding of eCommerce security – which in turn affects the industry by lack of knowledge of fraud, leading to overuse of chargebacks and ultimately hurting the consumers via higher fees. eConsumer Services® encourages industry education to consumers to decrease rising instances of credit card disputes in an industry which appears destined to eclipse that of traditional brick-and-mortar retail.
According to a recent BankInfoSecurity article, “consumers believe online purchases are more secure than those made at bricks-and-mortar retailers”,presenting a direct and worrisome contradiction to current eCommerce trends – reportedly, online merchants are paying $100B in fraud losses due to unauthorized transactions and fees/interest associated with chargebacks
eConsumer Services®, a third-party service that works to resolve transaction conflicts between consumers and merchants, maintains that consumers’ lack of concern surrounding credit card fraud is evidence of the need for education to the public, the responsibility of which the company says falls upon the shoulders of both banks and merchants alike as ecommerce continues to thrive into being one of the nation’s most prosperous industries.
In a series of surveys conducted during the first quarter of this 2014, more than 6,000 consumers in 20 countries were questioned on their perceptions about fraud. Researcher Shirley Inscoe of Aite was consulted about the misconceptions of card fraud among consumers, which some attribute to recent brick-and-mortar retail breaches, such as those that impacted Target Corp. and Neiman Marcus:
“I was very surprised to see the high percentage of consumers who do not trust that merchants use adequate security systems in their stores to protect their data,” said Inscoe. “…there was less confidence that in-store merchants used adequate security than online [retailers].” eConsumer Services® CEO Gary Cardone maintains that this way of thinking lulls consumers into a false sense of security when shopping online – a trend that will likely further increase card disputes between consumers and merchants as scammers take advantage, and in turn, increase costs for goods and services as merchants attempt to recoup the financial losses suffered by growing credit card disputes.
According to Cardone, preventing card-present fraud is a much easier feat than that of card-not-present (online) transactions. With face-to-face purchases, a merchant can request that the customer provides a valid I.D. to confirm his or her identity – all steps which are impossible during an online purchase.
And while online merchants bear immediate financial brunt in the case a chargeback is filed – a single credit card chargeback fee can cost between $15 and $35 dollars plus the cost of the transaction and associated merchandise (in addition to other bank fees that could apply) – the true victim is the consumer, who absorbs the chargeback fees that merchants attempt to recoup in the form of higher fees for goods and services.
“eCommerce is growing exponentially and along with that has come an increase in credit card disputes – but consumers are ultimately paying the price as merchants pass along those costs associated with chargebacks back to the consumers by increasing their prices,” said Cardone.
Cardone says there is a two-fold approach that consumers should take in order to protect themselves:
- Be vigilant in protecting personal and financial information when shopping online.
- If an individual suspects a credit card charge is fraudulent, rather than contacting their bank, seek to resolve transaction issues with the help of a mediation service – by doing so, consumers benefit by being assisted with a smooth resolution process facilitated by an impartial mediator with sufficient experience to resolve the problem quickly, saving both time and money for every party involved.
Cardone also went onto state that while chargebacks used to be a profit center for banks through merchant fees (regardless of merchant error or fault), it is now becoming a cost center – which Cardone predicts will soon turn against the consumer as well, in the form of bank fees or even credit dings if consumers are found to be in the wrong.
Because many customers do not contact the merchant before requesting chargebacks (i.e., transaction disputes facilitated by their issuing bank), hoping to expedite the process and simply obtain a refund for their unsatisfactory transaction, Cardone recommends banks and merchants work together in an effort to direct consumers to the correct step of first communicating with the seller, explaining the problem and coming to a viable solution for both parties – the result of which is the reduction of disputes quickly and with finality, presenting a significant cost savings for credit-card issuers and acquirers alike, making it less risky for merchants and their consumers, while helping to streamline a very intricate, aging and complex process.
eConsumer Services® serves to remedy consumer related issues by intervening in the dispute process—contacting the merchant directly on behalf of the consumer—to resolve any unsatisfactory transactions.This process significantly reduces the number of chargebacks filed, and restores a level of equal satisfaction to both parties.
About Global Risk Technologies™ and eConsumer Services®:
Global Risk Technologies™ is most known for their role in payment processing solutions that cater to each side of the value chain:Chargebacks911.com and eConsumer Services®.com.The firm is headquartered in Tampa Bay, Florida with offices in Ireland and Atlanta. They have approximately 350 employees worldwide and currently manage over 150MM in transactions each month, with clients located in the US and Europe.
eConsumer Services® focuses on the cardholder or consumer in order to encourage transactional resolution before it progresses to a chargeback. eConsumer Services® caters to the B2C (business-to-consumer) sector of Global’s initiative, in working to realize greater standardization and increased efficiency within the payments industry. eConsumer Services® is an online mediation service that works to effectively and efficiently resolve transaction issues between merchants, consumers, and banks. For more information, visit www.eConsumer Services®.com.