Block fraud and reduce chargebacks with real-time risk checks

Chargeback fraud, or friendly fraud involves customers falsely claiming that legitimate purchases were unauthorized or that they never received goods. Their card issuer responds to the claim by providing a provisional refund to the customer and investigating the case. Often, banks will give the benefit of the doubt to customers, leaving eCommerce merchants to bear the cost of these fraudulent claims. 

While the chargeback system is intended to protect online shoppers, bad actors have become adept at exploiting this process, getting their money back while keeping merchandise or securing access to services. This type of fraud is particularly challenging to fight since proving customer receipt or authorization in the digital space is extremely difficult, and traditional, third-party fraud prevention methods don’t apply.  

Failure to effectively stop chargeback fraud has severe financial and reputational effects on online retailers beyond lost merchandise and revenue, as card issuers charge fees of $20 to $100 per case. 

For high-volume merchants or e-commerce sites, these penalties can add up quickly and make a significant impact on your bottom line. Additionally, manual investigations reduce operational efficiency, leaving staff to spend hours gathering evidence and fighting disputes instead of focusing on higher-value tasks.

Savvy eCommerce firms seeking to reduce chargeback fraud should watch for warning signs such as multiple orders to one address using different cards or purchases from high-risk locations. Businesses should continuously monitor customer behavior and transactions to catch suspicious activity and prevent fraud. Other signs of potential chargeback fraud include:

• Multiple, separate orders in quick succession to the same shipping address
• Repeat orders with slight variations in contact details
• Unusually large order quantities that deviate from normal purchasing patterns
• Mismatched billing and shipping address
• Several failed payments before a successful transaction
• IP address location doesn’t match the billing/shipping address

These signs do not guarantee that fraud has occurred but should trigger enhanced security measures to verify the customer’s identity. 

Beyond chargeback fraud, online retailers face a wide array of threats that can negatively impact revenue, disrupt operations, and harm the customer experience. Organizations must build comprehensive security systems to stop multiple types of fraud attacks and vectors, such as:

1. Synthetic Identity Fraud – Fraudsters create fake identities by combining real and fabricated PII to open accounts, make purchases, and commit fraud before disappearing.
2. Account Takeover (ATO) Fraud – Attackers gain unauthorized access to legitimate customer accounts using stolen credentials, allowing them to change passwords, update shipping addresses, and make fraudulent purchases.
3. New Account Fraud (NAF) – Fraudsters use stolen or synthetic identities to create new accounts and exploit promotions, discounts, or credit lines, especially in BNPL and loyalty programs.
4. Loyalty Program & Promo Abuse – Fraudsters create multiple fake accounts to exploit referral bonuses, sign-up incentives, or loyalty rewards, often using automated bots.
5. Mule Fraud (Reshipping Schemes) – Fraudsters recruit individuals (mules) to receive and forward stolen goods, making it harder to trace fraudulent transactions.

Socure’s Digital Intelligence solution uses a comprehensive, “defense-in-depth” approach that binds granular device data to customer PII, creating rich profiles that enhance identity proofing. This entity profiling, combined with real-time monitoring of device attributes and historical consumer interactions, enables companies to instantly recognize anomalous activity and take action to stop fraud before it can do damage.

Traditional fraud prevention tools focus primarily on stopping third-party criminals using pre-defined rules and basic checks such as phone or email verification. When it comes to stopping first-party fraud (like chargeback fraud), these options fall short because the perpetrator is the legitimate cardholder. This means that “friendly” fraudsters can easily pass standard identity verification and account security checks. Socure helps eCommerce businesses minimize chargeback fraud by analyzing millions of accounts and billions of transactions to accurately predict and prevent bad-faith claims before they impact your bottom line. Powered by the world’s largest First-Party Fraud Consortium, Socure gives eCommerce businesses a manipulation risk score, enabling them to instantly assess customer risk at onboarding. Additionally, the solution provides real-time alerts and continuous monitoring to ensure organizations can act quickly to prevent fraud.