Continuous Auditability for Friendly Fraud
Continuous Auditability against Friendly Fraud
Last week we examined the necessity of constant sealing and verifying of data for digital financial transactions for the prevention of grand fraud and compliance. The need for sealing and verification of data was noted to be throughout the entire data flow, to make it not only continuously tamper-evident but also continuously auditable. Another identified prerequisite facilitating the verification process was the portability of proof so that each individual actor in the dataflow may autonomously verify data.
With continuously auditable data financial organizations can also add to their systems or platforms to make their entire workflow secure and verifiable. Most companies already have a digital data management platform. By securing the entire workflow and making it verifiable it enables the data management platform to be continuously auditable.
The range of challenges is wide, from money laundering and other high tier financial crimes to benign occurrences such as friendly fraud. This is important not only because actual modification or tampering of data is a threat if one vital party alleges tampering of digital data it can disrupt business, cost money, and cause other avoidable grievances. Even something seemingly negligible as friendly fraud can cause considerable damage to reputation and revenue when occurring in mass. Friendly fraud or chargeback fraud describes fraudulent or mistakenly made chargebacks, usually done by a credit cardholder. This issue is prevalent online, especially in retail. Although the transaction amount may be small, the chargeback can cost on average is 276% to 361% higher, depending on how many precautions have already been in place, than the actual chargeback amount for the merchant. Due to the complicated, costly, and time-consuming process for chargeback settlements, which reportedly stops just over half of the friendly fraud attempts. This means that merchants constantly face the challenge of fraudulent chargebacks with little means to counter them.
Merchant friendly Chargeback Defender
Generally issuing banks would side with their customer, the cardholder, and merchants’ have very little to dispute the claim. The merchant loses not only the revenue of the chargeback but the process costs and even worse loss of reputation for their payment processor and bank. By sealing and anchoring data, payment processing companies and digital marketplaces can support merchants and help them counter chargeback fraud, even enabling the automation of chargeback settlements. Platform providers would become merchant friendly platforms making online trade safer and fair for merchants as well.
This would revolutionize the way chargebacks are being processed. Now banks don’t automatically side with the chargeback issuer but can rely on neutral easily identifiable and verifiable data. Hence, overcoming the extreme time constraints data forensics and make claim assessment not only feasible but easy, creating a direct line of defense against fraudulent chargebacks.
If you want to find out how to prove the integrity of your data, contact us here!