Chargeback protection insurance

In card-not-present transactions, merchants are responsible for chargebacks, so they are required to bare the financial losses.

Losses can extend far beyond the value of the goods lost due to fraudulent purchases. If fraud management is not properly handled, high levels of unauthorized purchases due to suspected fraud or lengthy analyses can lead to lost sales, loss of any marketing investment, an adverse effect on the merchant's image and, most importantly, lost customers.

Merchants may not realize that transactions can be declined for the smallest errors. This may lead to loss of immediate revenue from the purchase, or more importantly, loss of a future loyal customer. As data breaches and fraud rises, security restrictions are becoming tighter. The need for hands-on fraud management for every merchant is now vital.

A chargeback occurs when a customer disputes a charge on his/her credit card bill. If the true owner of the card does not recognize the purchase, he or she will ask for their money back, by filing a complaint regarding a non-authorized transaction with the issuing bank. This is known as a chargeback.

In practice, the card administrator in the process of financial settlement between the parties debits the amount that would be transferred to the merchant.

The survival of a company that operates in the virtual world depends in part on minimizing its financial losses due to fraud, and on its ability to approve the largest number of orders in as short a time as possible. Therefore, a good anti-fraud service will include a thorough risk management system that ensures high rates of approved sales while minimizing chargebacks, all of this in as short a response time as possible. Companies that do not practice fraud risk management run the risk of turning down good orders because fraud is suspected, and delaying order approvals as they lack the analytical skills and resources required.