Reach Out to Credit Fraudulent Charges

Optimism is a valuable personality trait in retailers. But regarding fraudulent credit card charges to your customers, the National Retail Federation recommends you have the attitude, “It’s even worse than I thought.”
     According to a comprehensive analysis by LexisNexis Risk Solutions and Javelin Strategy & Research, for every $100 of actual fraud of all types, there is $270 of total fraud loss to the retailer. Understandably, among the items accounting for this exploded expense are ruptured customer relationships following phony credit card charges.
     About 33% of customers who have had to remedy a fraudulent charge on their account will completely stop shopping with the merchant, even though the debit will be readily cancelled by the merchant’s or cardholder’s bank. Missing from that $270-for-every-$100 figure is the cost in time and worry for the consumer in taking care it. Oh my, it’s even worse than you thought, retailer!
     To diminish the outlay, reach out to consumers who have been defrauded. Apologize for the bother, explain why the fraud is unlikely to happen again, and offer an incentive for continuing to shop with you.
     Even if not abandoning you, defrauded consumers often take actions which impede a smooth business relationship. Specifically, 37% avoid online registrations requiring personal information and 20% spend less money.
     The chief culprit in credit card fraud is CNP—Card Not Present. These are the transactions the customer makes without the merchant swiping the physical card. Decades ago, CNP consisted of telephone transactions. Then internet transactions from home were added, and now there’s growth in payments made in-store using mobile devices.
     When the consumer discovers a fraudulent charge, they feel that their safety has been violated. This psychological state is worse if the consumer discovers a fraudulent charge from the past. In the Regus scam which operated from 2006 to 2010, only one-tenth of the fraudulent charges were reported by the card owner before the Federal Trade Commission uncovered the fraud.
     The NRF recommendation to you, derived from the LexisNexis/Javelin conclusions, is to be a “fraud fatalist.” Assume you’ll be cheated. However, I prefer to word the recommendation as being a “fraud realist.” Assume, as part of doing business, you must implement increasingly sophisticated methods to curb fraud of all kinds and that you must account for the costs of fraud in your profitability projections. Some of those costs could include reaching out assertively to your defrauded customers.

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