An unauthorized transaction occurs when a purchase is made without the cardholder’s permission. This could be the result of stolen credentials, device or card theft, or account takeover. Issuers treat these transactions as fraud and typically initiate chargebacks on the cardholder’s behalf.

Fraud is the most common reason for chargebacks. However, very few fraud cases are caused by unauthorized transactions. The “fraud” is usually cases of friendly fraud and not criminal fraud.

Friendly fraud happens when a cardholder disputes a legitimate purchase, falsely claiming they didn’t authorize it or didn’t receive what was promised.

It’s important to determine if your fraud-coded chargebacks are actually unauthorised transactions or cases of friendly fraud, because the management strategy for each is very different.

If your fraud chargebacks are caused by unauthorized transactions, then you’ll want to evaluate the following:

• Your fraud detection tool and its rules
• The possibility of adding CVV, AVS, and 3DS2
• Firewalls and other website protection features

If your fraud chargebacks are cases of friendly fraud, then you’ll want to evaluate the following:

• Your billing descriptors
• Your cancellation, return, and refund policy
• Your customer service experience including longest wait times
• Your social media accounts and online reviews

If the task of distinguishing between criminal fraud and friendly fraud seems overwhelming, the AltoPay team can help you determine the root cause of your disputes. We can also help you identify fraud trends and create a strategy to respond.