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Protect against credit card fraud or pay the price, retailers told


“Chargeback fraud” leaves merchants on the hook for whatever gets stolen, says security specialist.

By Josh Needs 13 minute read

Accountants should warn business clients to guard against the increasing threat of chargeback fraud, one security specialist says, because merchants are the ones who get stung. 

ANZ country manager at Riskified Nick Kirtley said chargeback fraud was unique because the seller was the only one out of pocket. 

“If you’re a business that sells anything, particularly online, and a fraudster uses a stolen credit card to, say, buy a television, they get the product for free as they’re using a stolen card,” said Mr Kirtley. 


“But the cardholder is also protected. If someone sees their statement with a transaction for, say, $3,000 that they don’t recognise the first thing they do is panic and the second thing they do is call their card issuer and say they never authorised it.

“They raise what’s called a chargeback.” 

“The chargeback is a way of the cardholder ensuring they are not out of pocket and the transaction is reversed off their card, and unfortunately it’s the merchant or the retailer that pays for the reimbursement and no longer has the item — the television — that they sold.” 

Mr Kirtley said the challenge in preventing chargeback fraud was to protect against fraudulent purchases without refusing legitimate ones. 

“What merchants are constantly doing day after day is trying to figure out how to stop the fraud from happening accurately so they are not declining genuine customers, and to achieve this you need really advanced technology,” he said. 

“It’s a fluctuating cost in the business month to month, one month it might look okay to not have great fraud protection and then the next month you could be targeted and be hit quite severely.”

“You then have a lot of chargeback costs which really eat into your online profit margin.” 

Mr Kirtley said accountants and bookkeepers should be imploring their clients to have some sort of protection to avoid costly and unnecessary transactions. 

“The first thing to do is to make sure they have some level of online fraud protection in place to prevent stolen cards being used, because they will ultimately have to pay,” said Mr Kirtley. 

“There’s everything from free or very low-cost solutions available with some of the payment processes like Stripe and Braintree and others, they kind of have inbuilt fraud tools that do an okay job.” 

“But then there are also heavier fraud protection options such as 3D Secure, which provides a fraud liability shift but the problem is that it is relatively blunt and it declines several good customers as well as fraudulent ones.”

He said more complicated solutions such as Riskified’s system were available if the level of fraudulent chargebacks warranted it.

“It works out, based on over 100 data points that we collect on the order, whether or not the purchase is being attempted by the genuine cardholder or by another individual,” he said. 

“It’s so accurate that we don’t say to retailers we’ll reduce your fraud, we say to them that any orders we approve that end up in a fraud chargeback we’ll reimburse you for that fraud chargeback.” 

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Josh Needs

Josh Needs


Josh Needs is a journalist at Accountants Daily and SMSF Adviser, which are the leading sources of news, strategy, and educational content for professionals in the accounting and SMSF sectors.

Josh studied journalism at the University of NSW and previously wrote news, feature articles and video reviews for Unsealed 4x4, a specialist offroad motoring website. Since joining the Momentum Media Team in 2022, Josh has written for Accountants Daily and SMSF Adviser.

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