The global surge in payment fraud, which reached an unprecedented USD 48 billion in 2023, has put immense pressure on payment companies to deploy cutting-edge technology to tackle this growing problem. Leading the charge in this battle is the use of Artificial Intelligence (AI), which has emerged as a pivotal tool in combating the rising

The global surge in payment fraud, which reached an unprecedented USD 48 billion in 2023, has put immense pressure on payment companies to deploy cutting-edge technology to tackle this growing problem. Leading the charge in this battle is the use of Artificial Intelligence (AI), which has emerged as a pivotal tool in combating the rising threat of fraudulent transactions.

Chargebacks911, a pioneer in chargeback technology, reports that AI has become a crucial driver in addressing payment fraud and preventing disputed transactions. These disputes often stem from a process known as chargebacks, where a cardholder challenges a debit or credit card transaction, leading the card issuer to decide whether to refund the cardholder. While this system is designed to protect consumers from fraud and unfair merchant practices, it has inadvertently created a phenomenon known as “friendly fraud,” causing severe financial and reputational harm to businesses worldwide.

Understanding Friendly Fraud

Friendly fraud occurs when a cardholder wrongfully disputes a legitimate purchase out of confusion or intending to defraud a merchant. This type of fraud has far-reaching consequences, as businesses can lose nearly four and a half times the value of the reversed transaction, according to data from LexisNexis. The financial burden is compounded by the damage to the relationship between businesses, customers, and payment processors, potentially leading to higher processing fees and jeopardizing a company’s future viability.

Roger Alexander, a key advisor at Chargebacks911, emphasizes the importance of the chargeback mechanism while acknowledging its adverse effects on businesses. “The principle behind chargebacks is sound—it protects consumers—but as convenience becomes a priority for consumers, banks are increasingly relied upon to resolve disputes through chargebacks. Unfortunately, this has led to a surge in chargebacks, which are now devastating merchants at an alarming rate,” Alexander explains. “Chargebacks can not only cripple a business financially but also strain customer relationships and impact dealings with payment processors, creating a ripple effect across the entire organization.”

The Role of AI in Combating Payment Fraud

The complexity of friendly fraud lies in its many forms, making it challenging for merchants to effectively provide the necessary evidence to dispute each claim. For instance, if a customer claims a product was never delivered, the merchant must gather extensive transaction data, such as proof of delivery or authentication measures, to counter the claim. This process is tedious and labour-intensive, often requiring manual efforts prone to human error.

Visa estimates that up to 75% of all chargebacks are likely fraud cases, highlighting the urgent need for more effective solutions to differentiate between legitimate claims and friendly fraud. Traditional chargeback management methods have struggled to address this issue, as they rely on employees manually sifting through vast amounts of data, which is time-consuming and costly.

To combat this, major card schemes have introduced various tools designed to help merchants reduce chargebacks without compromising consumer rights. For example, Visa’s Order Insight tool allows merchants to offer customers refunds before initiating a chargeback. At the same time, its Compelling Evidence system provides guidelines to streamline the evidence required for disputes. Similarly, Mastercard’s Consumer Clarity and Mastercom Collaboration platforms facilitate real-time data sharing and dispute resolution.

Chargebacks911: Pioneering AI-Driven Solutions

Despite these advancements, a key challenge remained: consolidating all relevant information alongside a merchant’s data to create a comprehensive and accurate picture of each chargeback claim. This is where Chargebacks911’s innovative approach comes into play.

Through AI, Chargebacks911 has developed a platform that automates transaction data aggregation from various sources, including card networks, cardholders’ banks, and merchants’ internal systems. This AI-driven dashboard compiles essential data and learns from each case, enabling the system to identify the trustworthy source of chargebacks and suggest optimizations merchants can implement to prevent future incidents.

“This is exactly what our technology was built for, and our AI capabilities have long been our ‘secret weapon,’” says Alexander. “Since launching our platform, the predictive power and efficiency of machine learning have allowed our clients to significantly reduce the workload associated with analyzing, compiling, and submitting transaction data. This has resulted in a drastic reduction in illegitimate chargebacks, ultimately safeguarding merchants’ revenue and customer relationships.”

A Global Impact

Founded over a decade ago, Chargebacks911 was the world’s first chargeback remediation specialist to address the fraud epidemic. Today, the company is a global fintech leader, employing over 400 subject matter experts and supporting 27 industries across nearly 100 countries. Managing over 2.4 billion transactions monthly in all currencies, Chargebacks911 plays a vital role in protecting the entire value chain, delivering positive outcomes for merchants, acquirers, and issuers alike.

As AI continues to evolve, its role in combating payment fraud will become more integral. By leveraging the power of AI, Chargebacks911 is setting a new standard in the industry, helping businesses navigate the complexities of chargebacks and friendly fraud while ensuring that consumers’ rights remain protected.

For more information on how Chargebacks911 is revolutionizing the fight against payment fraud, visit Chargebacks911.

Written by: Christine Nguyen

===============================