Chargeback Prevention: improve your bottom line with anti-fraud services

A Q&A session with Adam Pivko, Lime Light ’s Director of Client Management & Anti-fraud Specialist. Adam has managed Lime Light’s merchants’ anti-fraud portfolio for six years with clients ranging from large Telecoms, to travel sites and subscription model businesses.

Q: Why should clients ensure they implement anti-fraud measures from the start? (Most clients have other priorities when setting up their business.)

I understand that when you’re setting up your business, fraud, specifically chargeback prevention, most likely isn’t the first thing on your mind. You’re too busy setting up your marketing channels, determining where traffic is going to come from, and how you’re going to ship a quality product. I’m here to make the case that adding fraud prevention to this list is a smart business move.

Unfortunately, we’ve seen time and again that waiting to implement chargeback prevention in your business after you’ve uncovered fraud is not the right way to go about things. This causes a flurry of activity as you rush  to quickly identify fraud and set up a system to manage it. When you finally get around to minimizing your losses, you’ve likely already lost a significant percentage of potential revenue. Yikes, that stings.   Fraud prevention is the perfect example of  “an ounce of prevention is worth a pound of cure.”

Q: What are the risks associated with NOT implementing an anti-fraud service?

We want to help you understand the cost of waiting until fraud finds you. Fraudsters are cunning, and forward thinking – it is crucial that merchants remain ahead of current and future trends. Smart technology is driving new revenue streams in eCommerce. Unfortunately, this also gives way for fraudsters to deplete your business potential through evolving means. You have a business to run, which depends on you maintaining good standing with your bank. Without a proactive and comprehensive anti-fraud system in place, merchants are going to be in a scramble addressing fraud & chargebacks after the horses have already left the barn. This process is time consuming, inefficient, and diminishes your customer experience.

With every eCommerce anti-fraud campaign, there are going to be some good orders that are declined, or what are called “False Positives.” With a well designed, managed and monitored tool, you can minimize these, but it is still important to account for this deficiency while striving for the highest level of accuracy possible. On the other hand, it is also unrealistic to think that one tool or service can get your chargebacks down to 0%.  It could, by declining every transaction, but nobody wants that! Therefore, you will be monitoring this teeter-totter, until you find the balance that is ideal for your business.

Whether it’s the cost of a lost sale, a transactional cost such as chargeback fees or wasted time for your employees – protecting your business against the hidden costs of fraud can make a significant impact on your ROI.

Q: Is there anything unique about implementing anti-fraud services for a subscription model business?

Typical straight-sale anti-fraud eCommerce solutions won’t work for a subscription model business. These businesses have a higher risk tolerance than traditional eCommerce.  You do not want your conversion rates to suffer by implementing an anti-fraud tool, but you still need a high level of accuracy on declines and as few false positives as possible. You need a service that understands the complexity of chargeback prevention as well as all aspects of anti-fraud eCommerce for a subscription business.

Thanks in part to our 6-year partnership with Kount, we know what subscription model businesses need and want. Kount has deep expertise in fraud prevention, and together we’ve developed a customizable solution.  With our service, we can tighten or loosen the rules to meet the requirements you wish, in most cases we are in the range of 2.5% decline ratio on your initial orders and with a solid 85% accuracy, resulting in approximately a 22% reduction in overall chargebacks.

Q: What makes this service unique?

Without giving away too much of our secret sauce; we have developed a combination of around 20 to 25 rules, including velocity checks, global and network chargebacks, and ‘distance between’ based rules. These rules integrate seamlessly with Kount proprietary technologies including Score and Persona, VIP black/white lists, device geolocation, device variables decisioning, and much much more. There are over 120,000 rule combinations to be made, and countless different reports we can create to monitor, proposed rule revisions, or just report on performance.

Q: Can you provide a concrete example of how implementing an anti-fraud service can impact the bottom line?

Sure.  Whether you run a small, medium, or high sales volume business; our anti-fraud software is effective. Here are just two examples to give you a sense of how our managed anti-fraud service can work for you:

  • Client A came to us with a 3.6% chargeback rate, and with only blocking 2.61% of their initial orders on a trial/subscription model, we brought their chargeback rate down to 2.04% after three months.
  • Client B came to us very skeptical of the service, but after two months has given us a claim that we are surpassing 90% accuracy on our chosen declines, and is very satisfied with our service, even though we are only blocking 1.7% of their orders due to fraud.

Q: Any final thoughts you’d like to share?

I have managed over 100 merchants in conjunction with our Kount partnership.  I have seen too many clients scramble to catch-up to fraud after the fact, losing substantial potential revenue.  In a nutshell, we take the hassle out of fraud prevention enabling merchants to prevent more chargebacks, uncover new sources of bad transactions, simplify fraud detection and dramatically improve bottom line profitability.  The real question is, “what are you waiting for?”

Sign Up for LimeLight’s Transaction Select service to block customers that have a high probability of a chargeback on a future purchase.