As the event ticketing industry continues to grow, so do the chances for legitimate profit to be stolen by fraudsters. But a new development in the ecommerce and mcommerce realms are pointing to an unusual source of fraud: a merchant's own patrons. Patrons are able to obtain a refund through a chargeback, which not only gets them their money back but also costs the merchant extra. This kind of chargeback is often referred to as friendly fraud.
Chargebacks are becoming a significant challenge for ticketing-based businesses, with the following being a typical scenario:
Steve buys a ticket to see his favorite band, and pays for it with his credit card. While there, he becomes stuck far away from the stage and ends up getting a drink spilled on him. Believing he deserves a refund for his poor experience, Steve requests a chargeback through his credit issuer.
This is just one of many scenarios where entitled patrons believe they're owed a refund, despite having knowingly agreed to enter into a legitimate transaction. The friendly fraud chargeback issue is only getting bigger, and ticketing vendors are struggling on how to deal with it.
How bad is friendly fraud?
With exceptional customer service continuing to be in high demand, ticketing vendors that operate in a digital space are seeing a huge uptick in the number of chargebacks they receive. Chargebacks are the forcible return of legitimate dollars spent on a good or service. Between 2016 and 2017, merchants saw a 179% increase, and lost 1.9 percent of their revenue to chargebacks1.
A chargeback is usually requested when a customer is dissatisfied with the product they purchased and go through their bank or credit issuer to receive a refund. Chargebacks mean additional lost revenue for merchants, not only via the refund and money of restocking lost merchandise but in the numerous fees attached to a chargeback request. For every dollar a merchant loses in a chargeback request, they pay $2.40 or more in fees.2
What is also interesting is the rise of chargeback fraud, also called friendly fraud. This type of fraud is when a customer requests a refund via chargeback on a legitimate purchase, sometimes with malicious intent. Because chargebacks are becoming easier to obtain, and since banks and other financial institutions are more interested in keeping their patrons happy, merchants get stuck with an unfair bill.
In the ticketing industry, it is estimated that about 0.1% credit card transactions are fraudulent, and half of that is friendly fraud. The average ticket order size is approximately $125.00.
But there is recourse via the chargeback representment.
Why merchants should fight chargebacks
Merchants can fight a chargeback by submitting evidence that the purchase was legitimate, known about, and agreed to on the part of the customer. A representment is a merchant's opportunity to present this evidence and make an argument that the purchase does not merit a chargeback.
For a while, chargebacks were often considered the cost of doing business; they were either because of merchant error or chalked up to a difficult customer who was considered a fraction of a business's income. But these days, with the number of ecommerce dollars expected to reach nearly $5 trillion by 20213, a business can no longer allow chargebacks to continue unabated. What's more, credit issuers will take note of a business's chargeback rate; if their rate is too high, businesses can be slapped with more fees, or placed in probationary programs. Some businesses can even have their merchant accounts permanently closed.
So it behooves a business to not only be aware of the types of transactions they are processing, but how they are interacting with patrons. There are numerous types of evidence that can be submitted with a chargeback reversal case, but not all chargeback requests are the same. Merchants should take care to evaluate the situation carefully, and can do so by collecting information before, during, and after the transaction so they can best evaluate what's really going on behind the scenes. Merchants can no longer rely solely on response codes to explain why a chargeback was requested.
One additional avenue merchants can explore when it comes to collecting evidence for a chargeback reversal case is social media. Images, comments, and location tags can all provide evidence that a transaction was legitimate and agreed to on the part of the customer.
Social media and friendly fraud prevention
Friendly fraud cases can be difficult to catch, but ticketing platforms can help their clients with chargeback cases. One way to detect if the ticket was received by the customer is through social media. According to Pew Research Center, 7 in 10 Americans use social media to interact with others and entertain themselves. Over half of these users visit a social media site more than once a day, making millions of posts. All of this is useful evidence for a chargeback reversal case.
Public images of patrons at concerts, outside a venue, or showing tickets to an event are all ways of verifying that the customer was the one to make the actual purchase. These images can be tagged with the user's profile, which can verify names and sometimes even addresses. The images can also be geo-tagged with the location where they were taken, which can sometimes be the venue itself.
Be sure to only use public images from the customer's social media accounts. Images and other information that are not public are not free-use, and can land a business in further hot water if additional parties are pulled into the dispute. This can be considered an invasion of privacy. It's simple enough to distort another person's face in an image using Paint or another image editing software. Also only use images that do not show the customer in a derogatory light.
Timestamped posts can prove that a customer was at an event on the day the event took place, even if they claim they were not. These items can provide a timeline of events that can persuade the arbitrator overseeing the chargeback dispute that a purchase was legitimate.
Many social media platforms offer the ability to take and instantly post video, which can also be tagged and timestamped. These videos can provide very strong evidence that a ticket purchaser was at an event. Videos of this nature often expire within a certain amount of time, so it's best to grab them quickly. Because they expire quickly, their original existence can be brought into question, so submit them with other strong evidence as well.
Again, make sure that only the original customer is evident in the video, and also ensure that they are not shown in a derogatory light.
According to the LexisNexis study on the true cost of fraud, many companies are still ultimately making decisions about potentially fraudulent cases via identification made by a human agent. Manual reviews eat up as much as 25% of anti-fraud budgets. Since different card issuers offer merchants a varied amount of time to respond to a chargeback—some as few as 10 days—collecting evidence in a quick and efficient manner is of the utmost importance. Automated systems that help you collect and sift through mountains of evidence can help speed the process, and Softjourn can assist when it comes to social media.
Softjourn’s social media solution
Based on evolving trends in the market, Softjourn developed a proof of concept for a social media aggregator that can help ticketing vendors parse through a patron’s social media posts and quickly find the ones that are most pertinent to a chargeback reversal case. The solution will kick off upon receipt of a chargeback, and begins to sort through a customer’s social media based upon the available information in the ticketing system. The solution will sort through some of the most popular social media sites: Facebook, Twitter, Instagram, pipl.com, and images.google.com. The solution will select the most likely social media profiles based on the information it has at hand and look through publicly facing information.
What’s more, the solution will also extract a facial image that can be used to best identify the customer in event photos that contain crowds of people.
The solution will use artificial intelligence to compile images that are tagged and captioned with information relating to the event in question. The search will include not only the patron’s name, but also the location, venue name, and other details available at the time of the search.
As part of searching for related event images, the solution will also search through third-party accounts/pages. The solution will search for locations where the user was tagged together with the event. For example, if the patron was tagged on a friend’s post from the event, a list of resources will be generated where the event is mentioned together with the user profile on third-party accounts.
Conclusion
Concrete, persuasive evidence goes a long way toward supporting a merchant’s dispute of a chargeback. Social media should not be the only evidence provided, but it can buttress a strong argument that a requested chargeback should be denied.
Softjourn’s solution can be run as an add-on service for event providers, or as part of an existing ticketing platform. With our solution, ticketing vendors can take back control and fight the sudden rise of friendly fraud.
