The multi-billion dollar gaming industry continues to grow year-on-year. However, the industry is not insulated from the threat of lost revenue through fraudulent chargebacks. These fraudulent claims do not originate from hackers and the more dangerous types of scammers. But from the young and innocent game users themselves. Many games incorporate in-game purchases, additional add-ons and subscriptions all of which are exposed to gaming chargebacks. Teenagers and younger children may use their parents’ or family members’ cards to make purchases to get ahead in their games without even realizing the severity of their actions.
It’s no longer a case of a child taking money out of their mom’s purse. Instead, the biggest victims will likely be the gaming merchants rather than the cardholders themselves. This type of fraud is known as family fraud, with a subset of the wider phenomenon friendly fraud. Unfortunately, it isn’t a rare occurrence; in fact, a study found that 46% of children had used their parents’ cards without permission. Once the cardholder notices the unauthorized transactions, they contact their bank, initiating the chargeback process.
Most children are not likely to own up to unauthorized transactions when questioned. Added to this, with payment details being saved to account, it allows easy access to be abused.
Additionally, gaming chargebacks may also feature other types of friendly fraud. For example, chargebacks that occur when the cardholder is aware of and authorized the transaction. It is a genuine and authorized payment where they will benefit from the product, yet still receive their funds back. Once users receive their item, they will then contact their bank to dispute the payment, resulting in a loss to the merchant. Statistics indicate that 60-80% of all chargebacks are, in fact, a result of friendly fraud.
Regardless, chargebacks result in a loss of revenue to the merchant. Added to this, the fallout with payment processors due to multiple chargebacks can be even more damaging, leading to heavy merchant fees are the closure of the merchant’s account altogether. Therefore, gaming merchants must be able to prevent and manage fraudulent chargeback claims effectively.
Family fraud can be tackled effectively using a range of resources. Initially, it may be worth examining the sales process to ensure enough data is collected before an order is issued. For example, a secure sign-in should be initiated when a user makes a purchase. This can include a pin or OTP that is generated to prove identity, or perhaps a biometric log-in available through smartphones. Added to this, a confirmation email should be sent to the email on record, which ideally should be the cardholder’s primary email. Securing and saving these details for each purchase can be used as compelling evidence in the case of a chargeback claim. Additionally, the email confirmation should offer an opportunity to cancel and refund the purchase. This will ensure unauthorized orders can be refunded directly to the customer rather than through a chargeback, spare thing merchant chargeback fees and a hit to their chargeback ratio.
Efficient customer service often provides the first line of defense against chargebacks. Regardless of whether or not a chargeback is likely to be friendly or family fraud, if a customer can get in touch, it can offer an avenue of recourse before the customer contacts the bank. Reminding them of refund policies and terms of service can often be a deterrent before a fraudulent claim is lodged. Additionally, refunds can be initiated directly, reducing chargeback costs through penalties and fees.
Dealing with chargebacks is no easy task. From understanding reason codes, compiling evidence, and identifying fraudulent cases, expertise and knowledge are required. Not to mention efficiency and accuracy when dealing with individual cases. However, this is where automated technology like Justt’s solution can help. Using industry knowledge paired with machine learning, chargebacks can be dealt with instantly and with high success results.
As the gaming industry continues to expand, friendly fraud, family fraud, and other types of gaming chargebacks are also likely to grow. Therefore, a proactive approach is required for gaming fraud to be effectively managed and dealt with. Ensure you’re up to date with the latest threats and industry trends that can affect revenue. Additionally, utilize tools and services available to effectively manage the threat of chargebacks.
If you’re looking to get ahead in the fight against gaming fraud, get in touch with Justt now to see how we can help.