Increased adoption of contactless payments during Covid-19 may be contributing to multiple types of fraud. This from merchant dispute specialist Chargebacks911.
“In a bid to reduce human interaction, the use of cash, and the touching of contact points such as PIN pads and cash machines, the UK’s contactless spending limit increased from £30 ($38) to £45 ($57) in April this year,” said Monica Eaton-Cardone, COO and co-founder of the firm. Mastercard reported a 40 percent increase in contactless payment activity in Q1 of 2020.
But Eaton-Cardone also said the dramatic increase in contactless payments may also be contributing to an increase in chargebacks. According to Eaton-Cardone, industries are now experiencing 10 times the amount of payment disputes that were taking place prior to Covid-19.
“If merchants want to reap the benefits of contactless payments, they need to be aware of the threats involved and have strategies in place to respond effectively”
“Contactless payments present a number of fraud threats,” she said. “For one, if a valid cardholder’s information is stolen, it can be added to a mobile device and used to make unauthorized purchases—leaving merchants covering customers’ losses. In addition to this third-party fraud, contactless payments present a greater opportunity for genuine customers to commit first-party (friendly) fraud and lie about whether or not a transaction was actually made by them. These scenarios pose even more of a threat while the retail landscape is going through this turbulent period and genuine claims are on the rise, so merchants are in less of a position to dispute false claims.”
Chargebacks911 cautioned that when merchants lose money to disputes, the cost will be hoisted back on to customers, since merchants raise prices to cope with losses. The firm is warning merchants to be vigilant when it comes to chargebacks that stem from contactless payments.
“If merchants want to reap the benefits of contactless payments, they need to be aware of the threats involved and have strategies in place to respond effectively,” said Eaton-Cardone. “At the same time, financial institutions should watch for activity that is unusual and out of line with typical consumer behavior – for instance, a consumer suddenly making a high-value purchase at a store that’s thousands of miles away from home. They should also be on the lookout for repeated use of the chargeback process, which might indicate friendly fraud, as 40 percent of consumers who commit this fraud successfully will repeat the practice within 60 days.”
Chargebacks911 anticipates that contactless payment adoption will continue to grow.