“I didn’t pay for this!” or just about a chargeback

In e-commerce, especially on marketplaces, fraud is not an “if”, but a “when”. You should always be one step ahead and not wait for something bad to happen. Data protection, user verification, monitoring of suspicious activities and a well-thought-out payment and refund system are the main tools that can protect your marketplace from big problems.

Chargebacks, or chargebacks in Russian, are generally a separate pain for any e-commerce platform, especially marketplaces. For those unfamiliar with the topic, a chargeback is when a customer requests a refund from their bank for a transaction, claiming that the item was not received, was defective, or was purchased without their knowledge. Banks most often take the client’s side, and marketplaces have to not only return money, but also pay additional commissions. Here are some stories about chargebacks from the practice of marketplaces and how these problems were solved.

1. Chargeback scams – “I didn’t receive anything!”

One of the most common schemes is when a buyer orders a product, receives it, but then initiates a chargeback, claiming that the product was not delivered. In one of our marketplaces, such a scheme surfaced en masse after big sales on Black Friday.

We noticed that certain users would place large orders, especially for expensive electronics and accessories, and after a few weeks the bank would start processing their chargebacks. The scammers claimed that the goods were not delivered, although we had all the evidence that the package was received: delivery tracking numbers and even customer signatures. But during the chargeback process, banks often ignored this evidence and took the client’s side.

How we fought: Improved documentation of each transaction and delivery has played a key role in combating such chargebacks. We began to collect additional evidence: photos of goods being delivered, GPS coordinates of couriers, scans of signatures, and even video recordings from cameras in warehouses where shipments were recorded. We also connected third-party partners specializing in combating chargebacks, who negotiated with banks on our side.

It turned out that many banks do not even consider in detail all the information provided, unless the seller himself insists. We began to be more active, filing appeals against chargebacks and providing all possible evidence. As a result, the percentage of successful chargeback solutions for us has increased significantly, but, unfortunately, we were not able to completely get rid of this problem.

2. Chargebacks by subscription

Another scheme that our marketplace encountered is related to automatic subscriptions. We introduced premium subscriptions for merchants, which allowed them access to additional analytics tools and product promotion. Everything was transparent: clients agreed to the subscription and confirmed auto-debits every month. However, after some time, a wave of chargebacks began with complaints that “the write-offs occurred without the client’s knowledge.”

Most of these cases were due to the fact that people simply forgot about the subscription, but there were also real cases of fraud when buyers used the services for several months, and then tried to return the money through the bank for the entire period, claiming that they did not know about the subscriptions.

How we fought: We began to take a more stringent approach to notifications about subscriptions: a few days before each debit, we sent notifications by email and SMS with a reminder of the upcoming payment. We also added a separate section to the site where users could easily manage their subscriptions, see upcoming charges and turn off auto-renewal.

In addition, for all new subscription users, we have introduced mandatory confirmation through 2FA (two-factor authentication) to eliminate the possibility of fraudulent subscription to paid services without the user’s knowledge. These measures made it possible to reduce the number of chargebacks for subscriptions, although, of course, it was not possible to completely get rid of this problem – there are always people who simply forget or deliberately try to deceive the system.

3. Chargebacks due to long delivery

Often problems with chargebacks arose due to delivery delays. On one project we were working with international suppliers and delivery could be delayed due to logistical issues or customs delays. Buyers, waiting for their goods, began to panic and submit chargeback requests, claiming that the goods had not arrived.

The problem was aggravated by the fact that international delivery always involves risks: parcels could be delayed for several weeks, and the buyer simply lost patience. Some customers sincerely believed that their goods were lost and submitted a chargeback, even if the goods were already on their way.

How we fought: To reduce the number of such chargebacks, we began to actively inform customers about the status of their orders. Each order included detailed delivery route information with regular updates. If there were delays, we alerted customers immediately, giving them the opportunity to change or cancel their order before they submitted requests to the bank.

In addition, we entered into agreements with courier services that provided us with more detailed tracking data. This allowed us to better track each stage of delivery and show customers where their goods are. In some cases, we have offered customers partial refunds or discounts on future purchases to compensate for the wait, which has helped reduce dissatisfaction and prevent chargebacks.

4. Third Party Seller Scams

On marketplaces where there are many third-party sellers, chargeback fraud can be a real problem. Sellers can accept payments without shipping the goods and then disappear, leaving buyers to deal with problems through the bank. In one of our projects, there was a massive wave of chargebacks due to one such seller who, having collected money for expensive goods, simply did not send them.

The problem was that the marketplace, as a platform, was essentially between the buyer and the seller, and although the money was transferred directly to the seller, the buyers still held the marketplace responsible. As a result, we had to deal with the banks and compensate clients, which led to serious financial losses for the platform.

How we fought: After this incident, we revised our rules for working with sellers. First, we have strengthened our vetting process for new sellers, requiring them to provide bank guarantees or other financial collateral. This helped reduce the risk of sellers running away with their money.

Secondly, we have introduced a system of temporary retention of funds. Money for the purchase was frozen for several days after the goods were shipped, and only if the buyer confirmed receipt of the order were the funds transferred to the seller. This gave us more confidence that sellers were fulfilling their obligations.

5. Chargebacks for subscriptions to fake services

There was a case where scammers created sellers on the platform who offered non-existent digital services. Buyers signed up for these services, but in reality received nothing, and, of course, they quickly began to submit chargebacks. The problem is that fraudulent sellers managed to receive payment before the chargebacks were processed and disappeared, leaving the marketplace with debts to the banks.

How we fought: We increased moderation for new sellers, especially those offering digital or hard-to-vet services. They introduced mandatory verification of all digital products before posting on the platform, as well as freezing funds for services until the buyer confirms their receipt. This helped minimize the number of scams in this category and reduce chargebacks.