Order Insight & Mastercom: Chargeback Fraud Prevention

Table of Contents

  1. What is chargeback fraud?
  2. How do you prevent chargeback fraud?
  3. What is Order Insight?
  4. What is Mastercom?
  5. What's the difference between Order Insight and Mastercom?
  6. Know your chargeback prevention options
  7. Who is responsible for chargebacks?
  8. What is chargeback protection?
  9. How can merchants prevent chargebacks?

It’s not easy being a card-not-present merchant in today’s payment ecosystem. As fraud becomes more prevalent and sophisticated, many new security measures have come about, but most of these are designed to protect cardholders, with any benefit to merchants being only ancillary.

Unfortunately, the original method of dealing with fraud, the chargeback, is actively harmful to merchants, and can be abused by cardholders with ill intent. Chargeback fraud hits eCommerce merchants especially hard, and can be difficult to prevent. Fortunately, there are some tools available that can help.

Chargebacks are a necessary tool for cardholders, who might feel considerably less comfortable about online shopping without them. However, they can be a significant challenge for merchants to deal with, especially when they open the door to “friendly fraud,” where customers request a chargeback on a legitimate transaction.

Visa and Mastercard each have their own tool aimed at preventing chargebacks and reducing the complexity of disputes. Visa has Order Insight, and Mastercard has Mastercom.

What is chargeback fraud?

Chargeback fraud occurs when a customer makes a purchase, then contacts their bank to file an illegitimate chargeback against the merchant.

Chargeback fraud is a major issue for eCommerce merchants, draining their revenue and increasing their chargeback ratios. There are two common causes of illegitimate chargebacks:

  • Mistakes: The cardholder might mistakenly believe they are the victim of fraud because they see a transaction they don't recognize on their bill. This can be the result of an unclear merchant descriptor, a forgotten purchase, or a purchase by a spouse that wasn't properly communicated.
  • Intentional fraud: This is when a cardholder makes a purchase and then later claims it was fraudulent despite knowing otherwise. Sometimes they feel entitled to a chargeback due to bad customer service or a purchase made by their child, other times they're simply trying to get something for free.

How do you prevent chargeback fraud?

Some key methods of chargeback fraud prevention include good customer service, chargeback deflection tools like Order Insight and Mastercom, and an effective strategy for fighting illegitimate chargebacks.

Depending on the type of business, there are a number of steps merchants can take to prevent illegitimate chargebacks:

  • Improving customer service to have greater availability and ability to handle customer issues to their satisfaction.
  • Providing refunds generously to customers who might otherwise file a chargeback.
  • Improving billing practices, such as having a clear merchant descriptor and notifying customers before any recurring payment is processed.
  • Implementing tools like Order Insight and Mastercom to deflect illegitimate chargebacks.
  • Hiring a chargeback management firm to fight fraudulent chargebacks on your behalf and recover lost revenue.

What is Order Insight?

Order Insight is a Visa program that allows merchants to provide additional information about a transaction to the issuing bank when a cardholder contacts them to dispute a transaction.

The primary benefit of Order Insight is stopping cardholders from disputing transactions they don't recognize. It provides additional transaction information to the issuing bank automatically in real time. The bank can then communicate that information to the cardholder, helping them connect the transaction to the purchase they made. It can also scare off those who might intend to commit chargeback fraud.

Order Insight can also be used, at the merchant's discretion, to immediately refund a cardholder who is disputing a charge, preempting a chargeback.

For more thorough coverage of the program, check out our complete guide to Order Insight.

What is Mastercom?

Mastercom is a system created by Mastercard to streamline the chargeback process and enable merchants to automatically respond to retrieval requests, thereby preventing certain chargebacks.

Mastercard’s dispute resolution platform, Mastercom, includes a free API that merchants and payment processors can implement. Like Visa Resolve Online (VROL), Mastercom's primary purpose is streamlining the entire chargeback process by providing an online platform for transmitting documentation between the parties involved. However, Mastercom can also provide a similar benefit to Order Insight by providing issuing banks with more information about a transaction.

As with most card networks, Mastercard's chargeback process has an optional first step called a retrieval request, where the issuing bank can request documentation about the disputed transaction.

If both the bank and the merchant are set up for it, Mastercom can automatically respond to a retrieval request with the appropriate documentation in a matter of seconds

Although the details are slightly different, this essentially fills the same role as the additional transaction information provided by Visa's Order Insight, preventing chargebacks from confused customers and scaring off some fraudsters.

What's the difference between Order Insight and Mastercom?

The chart below lays out the differences between Visa's Order Insight and Mastercard’s Mastercom, the mechanisms by which they intend to reduce chargeback rates, and how much of a reduction merchants can expect to see by participating in either program.

  Order Insight
Mastercom
Card network Visa Mastercard
Objective Prevent chargebacks by allowing merchants to provide additional transaction information or issue a preemptive refund.
Prevent chargebacks and reduce the time they take by creating a direct online connection between merchants and issuing banks.
Chargeback reason codes expected to be reduced
Retrieval Request, Unrecognized Disputes, Fraud Disputes, Consumer Disputes Retrieval Request, Customer Service, Fraud Disputes, Authentication Disputes, Processing Error Disputes
Chargeback reason codes NOT expected to be reduced
Processing Error Disputes, Authentication Error Disputes N/A
Features Merchants are given notice of purchase inquiries and have the ability to respond to issuers with order/transaction information or a refund within a matter of seconds Merchants are given notice of retrieval requests and have the ability to respond to issuers with order/transaction information within a matter of seconds
Enrollment requirement Merchants are not required to enroll in Order Insight
All merchants will be enrolled in Mastercom through their acquirers
Integration method Enterprise merchants can integrate with Visa directly. Small and medium merchants can enroll in Order Insight through 3rd party facilitators like Chargeback Gurus Integration handled in-house or by a 3rd party using APIs and/or SDKs provided by Mastercard
Cost The price of Order Insight alerts varies, but is often $8-$10 per deflected chargeback
None, although there is a $0.65 fee for uploading scanned documents. Responses to retrieval requests that are over 4 pages will also incur fees
Service activation time period Within 2 weeks after enrollment and completion of integration Varies
Predicted chargeback reduction rate 40% to 50% 25% to 30%

 

Know your chargeback prevention options

Merchants should always use all the tools available to avoid chargebacks. With Order Insight and Mastercom, merchants can stop disputes before they start to avoid costly chargebacks and fees.

While a significant percentage of illegitimate chargebacks can be prevented using these tools, for those that still get through, it's important to fight them through representment. While some merchants handle this in-house, more and more are realizing the benefits of hiring a professional chargeback management firm to handle the process. Experts like those at Chargeback Gurus have a much higher win rate when fighting chargebacks, and can provide bespoke solutions for preventing them as well.

FAQ

Who is responsible for chargebacks?

The merchant is responsible for chargebacks by default and bears the burden of proof when fighting them.

What is chargeback protection?

Chargeback protection is a service that supports merchants by protecting sales against loss due to chargebacks. Payment processors may offer this in limited circumstances to protect merchant revenue.

How can merchants prevent chargebacks?

A strategic combination of customer service, fraud prevention, and chargeback prevention and recovery are all part of a healthy chargeback prevention framework.


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