Sign In

Q&A: why it pays to follow fraud trends

Nisha Suwali, international partner business director at Kount, an Equifax Company, talks data, damages, and the rising tide of first-party fraud

Istock 1254423087

Hot on the heels of ecommerce’s Covid-fuelled growth spurt, the cost-of-living crisis has nudged online shoppers to dispute purchases more often and with less foundation. With reports predicting more than 238 million chargebacks in the ecosystem globally in 2023, businesses have every right to be concerned.

Waves of chargebacks can do a number on a brand’s reputation and resources – not to mention its bottom line. Nisha Suwali is the international partner business director at Kount, an Equifax Company, which specializes in fraud detection and chargeback management. She believes the issue is made more complex by a pervading lack of visibility. So, consolidating data and building a solid understanding of fraud trends and consumer behaviours should be top of retailers’ to-do lists.

Chargebacks were intended to work as a consumer safeguard… But the process is now overly-favourable towards shoppers

To what extent are chargebacks becoming a pressing issue for merchants?

Chargebacks are a common problem for merchants operating in the ecommerce space that is only growing larger with every passing year. We just need to look at the figures to see that. By 2026, global chargeback transaction volumes are estimated to reach 337 million, a 42% increase on this year’s levels.

The damage can be huge, with companies losing revenue from products or services in addition to the operational costs and potential fines from payment processors. Chargebacks were intended to work as a consumer safeguard, increasing confidence in payment cards by giving cardholders a way to recover funds from fraud. But the process is now overly-favourable towards shoppers. Since it’s often more convenient for cardholders to dispute a purchase through their bank than to contact a merchant directly for a refund, chargeback misuse has become commonplace in the digital market.


How successful have merchants been in getting to grips with the legitimacy of disputes or chargeback claims?

Understanding which disputes are legitimate can be a minefield for merchants. While online purchases are more seamless than ever, an opportunistic form of fraud is on the rise: first-party misuse, often referred to as ‘friendly fraud’. When most people think of fraud, they think of stolen account numbers or identity theft.

In reality, friendly fraud can account for up to 75% of all chargebacks. A first-party misuse chargeback fraud is when a consumer attempts to initiate a chargeback under fraudulent claims. Instead of contacting the merchant directly and requesting a refund, the consumer will contact their card issuer and falsely claim that the product was defective, that it wasn’t delivered at all, or that they didn’t authorise the transaction.

Post-Covid, more and more companies are embracing ecommerce across a range of digital channels. Operating a business in a new environment is demanding, and before merchants can even begin to think about recovery and challenging a dispute, they need to understand the chargeback itself.

Do merchants have the data points they need to accurately identify fraud trends?

Retailers need to ensure they remain one step ahead as fraudulent methods evolve and bad actors become more efficient at finding ways to exploit vulnerabilities in the system. What you need, then, is a proactive, preventative approach, constant observation, and robust responses to sophisticated schemes.

Most merchants can access the data they need to make informed, data-driven decisions. However, it is a struggle to collect, consolidate, analyse, and understand the data. That’s why partnering with a fraud and chargeback solution provider is so important. Not only do merchants have easier access to critical information and better transparency about what it means, but the technology can use that data to automate error-prone, labour-intensive management tasks.

Plus, the provider can supply additional data that most merchants struggle to collect themselves: device information. Device fingerprint data is a crucial part of the new Visa CE 3.0 initiative. If merchants don’t have this data, they don’t qualify for protections. 

What evidence is needed to challenge chargebacks, and how can companies use data to respond to fraud?

One of the biggest challenges businesses are up against is not being able to fully verify customer’s identities, which leaves them either with an elevated risk of fraud or saddling the customer with unnecessary friction. The data gathered by anti-fraud software provides a view of what customers are interested in, the type of device they normally use to make payments, their location and how much they typically spend. All of that insight is vital for businesses to identify suspicious behaviours.

If a transaction is disputed, merchants can use ‘order validation’, which allows banks to request additional information before issuing a chargeback. This information can be shared by a fraud prevention provider in real time, enabling the bank to resolve the dispute efficiently. If a chargeback cannot be prevented, it’s really important that companies have access to this level of customer data to be able to refute the cardholder’s claim.

Often, when businesses receive a chargeback, the immediate focus is on fighting that individual case and clawing back lost revenue. Although that’s important, merchants can and should refer to the data to gain useful insights about the issue. Why was the transaction disputed? Has this customer previously attempted a chargeback? That context is important and over the longer term, data can expose patterns, trends and inconsistencies that could strengthen the business’s chargeback management strategy.

For more information about chargeback management, visit