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Did you know that nearly 60% of businesses in India experience fraudulent transactions each year? No matter your industry, transaction risks can lead to significant financial losses and directly impact customer satisfaction.
At Cashfree Payments, we had a webinar with experts in the field of payment risk protection where discussed about disputes and chargebacks which are a result of payment fraud.
- Vijendra Goyal – Director, Trust and Safety at Cashfree Payments with 14+ years of experience in merchant risk, including 10 years in e-commerce, solving risk problems for Ola Money, PhonePe.
- Nishant Tyagi – Group Product Manager at Cashfree Payments with 10+ years in product and tech across payments, credit cards, and hyperlocal platforms like Magicpin.
- Vijay Surya P – Product Marketer for RiskShield at Cashfree Payments, who moderated the session.
Why should we talk about disputes and chargebacks today?
E-commerce in India is growing due to ease of business, payments and customer awareness. But on the other hand, the avenue for fraud in terms of disputes, chargebacks and reversals are also increasing, which is kind of cancerous to the business.
If topics around disputes and chargebacks are not discussed, they are bound to affect honest businesses.
Eventually you end up losing your revenue due to P&L hit, the operational costs of dispute resolution, etc. Businesses should have a system of checks and balances to act as a shield from constant attacks by bad actors.
Due to high dispute/fraud there is also the risk of debit freeze by banks when Law enforcement agencies are involved in the picture.
It hampers the business reputation affecting customer trust.
In industries like Gaming, where your platform safety is very important, trust is a moat. In case there are a lot of transactions made with stolen cards, complaints from the original cardholder can prompt the cyber cell to reach out to you for more details and even summon you to court.
The Extent of Payment Fraud Today
The value of chargebacks and disputes across the world is $50 billion. We can consider 10% of it to be in India.
New ecommerce players are specifically targeted by fraudsters and we see 5-25% of their orders as fraudulent. This is because new businesses aim for revenue first and still haven’t built concrete guardrails to protect themselves from fraud.
Once you have matured – still the number hovers around 2-4%, once fraud insights and analytics have been built and anti-fraud measures are set in place.
According to LexisNexis for every 1000 rupee of fraud, Indian businesses end up spending 4000 rupees to mitigate it – including effort required to contest it, RCA, document submission, refunds, and more.
Risk protection is required for businesses of any scale. Not just the small D2C stores, even the largest of Indian marketplaces are getting hit by fraudulent customers.
Businesses of all sizes require fraud protection since even the largest Indian marketplaces continue facing sophisticated fraud attempts. Here is one of the latest fraud attacks that affected the largest ecommerce marketplaces in India:
Common Fraud Scenarios By Industry
The panel identified several fraud patterns across different sectors:
E-commerce:
- Payments using stolen card information with OTP verification
- Phishing operations placing orders for resale purposes
- “Friendly fraud” where purchasers falsely claim non-delivery
- Various refund manipulation schemes
- Unauthorized account access, particularly affecting digital wallets
- Deceptive UPI collection requests
Utility Payment Issues
These frequently involve internal misconduct:
- Staff processing bill payments with credit cards before initiating chargebacks
- Employee collaboration with external fraudsters using stolen payment methods
Gaming Industry Challenges
- Potential money laundering activities raising regulatory concerns
- Fraudulent transactions using stolen payment credentials
- New accounts from recognized fraud hotspots engaging in deceptive practices
Practical Prevention Approaches
Goyal advocates strong user verification processes alongside vigilant transaction monitoring. “Companies should gather comprehensive data and regularly examine patterns that might signal system weaknesses. Quick responses to anomalies like unusual purchasing behavior or decreased payment success rates are crucial.”
He recommends watching for:
- Unusual refund patterns from particular regions or customers
- Users making excessive transactions within short periods
- Elevated chargeback levels from specific merchant accounts
- Irregular purchasing behavior from individual customers
Tyagi outlined several monitoring guidelines:
- Monitor large purchases or orders initiated by recently created accounts
- Activity originating from areas with known fraud prevalence such as Jamtara, Nuh
- Location discrepancies between shipping addresses and order placement
- Signs of organized fraud rings sharing payment methods
- Mismatched cardholder information
- Technology to identify multiple accounts using single devices
- Verification of phone numbers and email addresses for legitimacy
Regarding dispute management, he emphasized maintaining detailed records including transaction receipts, shipping confirmations, tracking information, and delivery verification.
Additional protective measures include:
- Thorough verification during account creation
- Secondary authentication through Aadhaar verification
- Customer incentives for completing security procedures
About RiskShield: The Comprehensive Payment Protection Solution
Cashfree Payments offers RiskShield, a fraud prevention platform designed to detect and block suspicious payments. RiskShield helps cut disputes and chargebacks by upto 90%. It has three major features:
- ML-powered fraud-monitoring based on 1 million+ data points
- Velocity checks that can effectively curb payment scams and known fraudulent patterns
- Blacklist fraud customers based on 8+ parameters such as email, mobile, Card number, Card BIN, UPI ID, UPI provider, Device ID and more.
- International fraud registry that detects known fraudsters.
Multiple businesses trust RiskShield with their payments and dispute prevention. You can set up a 1:1 call with Nishant Tyagi to get a risk audit done for your payments system. Schedule your call here: https://form.typeform.com/to/nRuW0GkA?typeform-source=www.cashfree.com
