Can Geolocation Reduce Your Friendly Fraud Chargeback Volumes?

We’ve seen in previous articles how a multi-pronged defence strategy can help you prevent fraud, with Geolocation being just one key element of those defences. The use of mobile device GPS tapping through Geolocation during the purchase can head off potential fraudsters by identifying the location of the device used to transact against the known location of the legitimate cardholder, such as their billing address.

This information, should it not match, could prompt you to err on the side of caution when considering accepting the transaction, bearing in mind the possibility of the genuine cardholder being away from their home or workplace, resulting in a false positive.

The Role of Geolocation in Fraud Prevention

What if the location of the payment device matches the known cardholder billing address along with other fraud prevention tools giving you the green light? Happy days, you go for it, you can accept the transaction and ship those goods, resulting in another successful sale. But wait—a little while later, a fraud chargeback appears in your processor’s portal for that exact transaction. It seems your customer has forgotten about the transaction, doesn’t recognise your descriptor, or may actually be undertaking friendly fraud, in other words, trying to steal from you. What can you use to help defend the chargeback and justify your charge as legitimate?

Enhance Your Chargeback Defence Against Chargebacks

You may already have a suite of defence information to help you fight your fraud chargebacks, such as AVS, IP Address, and CVV. However, the addition of Geolocation data will certainly enhance your case when challenging potential friendly fraud disputes. With 51% of online retailers reporting an increase in friendly fraud cases and 46% stating they did not defend the chargeback due to complicated processes and guidelines, every piece of additional data included in the response package makes the defence evidence more compelling and worthwhile.

How Geolocation Works

The location-identifying software within the merchant’s mobile application or web browser’s checkout page collects data from multiple sources, including GPS, WiFi, GSM, browser/HTML5, and IP address, to detect the location of the payment device at the time of the authorisation request.

The integration of the location-identifying software within the payment risk engine is usually achieved using an SDK (Software Development Kit) or JavaScript file. If the Geolocation data contained within the transaction information matches the cardholder’s billing and delivery address, then that’s pretty compelling evidence to say the device used to carry out the transaction was within 50 meters of the recognised location at the time. If this data is included in a relevant, detailed, and concise defence package the person working the case for the issuer will think twice about proceeding with the dispute.

Historical Location Data

What if the cardholder is a long-term customer who has placed orders with you previously and suddenly disputes a charge as fraudulent? Some Geolocation vendors can supply historical location information for devices and/or users, which you can include as part of your rebuttal package as evidence of past transactions not previously contested.

The Impact of Geolocation on Friendly Fraud

Friendly fraud affects most e-commerce merchants at some point, so the more defence options you have, the better your chance of stopping the perpetrators in their tracks. Not only do you have a higher chance of a favourable outcome for any incoming illegitimate fraud disputes, but you also send a clear message to those individuals that you are willing to protect yourself against any future erroneous disputes. Bear in mind that around 40% of consumers will repeat the action again within 60 days if they are successful the first time.

The Importance of Geolocation in Chargeback Responses

Incorporating Geolocation data within your chargeback response package can be an effective deterrent and help bolster your win rate by up to 30%-40%. It’s important to have the right systems in place, and Geolocation is one of those systems that will bolster your defences not only against fraudsters but also against bad actors perpetrating friendly fraud.