What is a chargeback?
A chargeback is a charge that is returned to a payment card after a customer successfully disputes an item on their account statement or transactions report.
How does a customer Chargeback?
A customer can chargeback for a variety of reasons, the two most common ones are
- Fraud - where the customer claims they did not authorize the transaction to take place
- Dispute - where the customer is unhappy with the item/service they receive and has failed to resolve it with the merchant.
The customer speaks with their bank about the transaction on their statement and requests it is charged back. The customer's bank then submits a claim on behalf of the customer to the merchant's bank to effectively reverse the transaction.
Customers can dispute a transaction for up to 120 days from the initial transaction, though typically we see customers who do dispute do so within the first 30 days of the initial spend.
What is friendly-fraud?
Despite the name, friendly-fraud is anything but friendly. This type of fraud is often referred to as friendly fraud because the customer will make claims that seem believable and honest. But in actuality, if this type of fraud was occurring in a brick-and-mortar shop, it would be called theft or shoplifting.
Friendly-fraud is an unfortunately common occurrence in the chargeback world where a customer essentially wants to get something for free, read more about friendly-fraud here.
What does a chargeback mean for me?
When a chargeback occurs that we can't successfully defend, the 85% earnings will be deducted from your balance and shown on your statement. This is just to cover part of the cost of the service/item charged back.
What does a chargeback mean for Fanvue?
Fanvue pays the remaining 15% of the total chargeback amount. In addition, for every chargeback Fanvue is charged a fee from the bank ranging between $25 to $50, for each dispute, depending on the type of chargeback. This is paid for by Fanvue and never put onto the creator. Even if the purchase was only $10, Fanvue still pays an additional $25 to $50 fee on top of that.
Is Fanvue doing anything to prevent chargebacks?
100%. Not only are chargebacks a significant cost of doing business for both the creator and for Fanvue, but it's also incredibly deflating. Fanvue tackles chargebacks from two perspectives:
- Preventative Action
- Reactive Management
To prevent chargebacks from happening in the first place, Fanvue has a variety of in-house and 3rd party solutions to mitigate chargebacks from arising.
The first step in the process is email verification, either via a social connection or by having the user manually confirm their email address helps kill any bots or fake email addresses from signing up.
Secondly, all users pass through a basic background check, analysing the IP Address and Email address along with a few other variables against known databases and providing risk scores on them to determine if we should enable the account to make payments on the site.
Next, when making the first payment, users' card details, names, and addresses are verified against bank-level secure databases. Some users go on to complete PSD-2 which isn't available in all countries yet but confirms the customers' identity and ownership of the card.
The following payments and activity are then monitored and run through pattern checks to identify if a customer has several failures or risky spending habits, manual checks take place daily on those which are flagged.
Finally, we frequently review all failed spending on Fanvue to identify hot risks and common failure points.
When a user charges back, we get an alert just before it hits our bank. Unfortunately for Fanvue, this means the chargeback fee is inevitable, however, we are still able to contest the dispute. We begin gathering all the information we have on the user and their spending habits to enable us to contest the dispute raised by the customer. All the information processed in Preventative Action is pulled and shared with the bank with the aim to successfully challenge the dispute so the creator and fanvue can keep the cost of the service/item.
As a consequence of any attempted chargeback, successful or not, Fanvue blocks the IP and Email address of the customer and suspends their ability to make payments and log back into Fanvue. Any chargebacks that come through as reported or suspected fraud have their information passed on securely to the relevant authorities, whilst remaining compliant with GDPR.
What can I do to prevent chargebacks and fraud?
Key things we recommend to creators are as follows:
- Fans who are keen to spend significant amounts of money in a short period of time, without hesitation. It's unlikely that a genuine customer would send over large amounts of cash without knowing what they're getting, the quality of it, they'll likely put up a bit of a fight and try negotiate prices down when they're genuinely spending their own money.
- Fans who want a lot of content very quickly after recently subscribing - this is a key indicator of someone trying to steal content and delete their account once they've got it.
We've heard of creators using "delay" tactics, where they restrict fans from buying more than 1 or 2 pieces of content within their first 7 days of subscribing. This works as most scammers and fraudsters typically want to get in, get the content, and leave quickly before they're caught, and having to wait 7 days isn't something they can often afford for their scam to be successful.