The chargeback fraud prevention process is intended to protect consumers from illegally billed purchases. Unfortunately, it is also a costly and time-consuming procedure for merchants to fight. The best approach to chargeback fraud prevention is a two-pronged strategy: prevent fraudulent transactions in the first place and contest valid claims when they occur. This article outlines the best tools and strategies to combat both.

The biggest risks for online retailers and service providers are from customer fraudsters who falsely claim they never received the product they ordered, that it wasn’t what they expected to receive, or that they canceled a recurring transaction but was still charged. These types of complaints are more difficult to prove than other forms of fraud, but are nevertheless a serious threat to businesses’ bottom lines.

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Some of the best ways to prevent these kinds of disputes is to use fraud detection software that combines things like link analysis and suspicious activity monitoring to identify atypical shopping patterns. This can alert you to a wide range of potential issues, from high-velocity ordering (orders that are uncharacteristically large based on historical activity) to orders sending a lot of the same item to the same address.

It’s also a good idea to communicate clearly with customers throughout the order lifecycle and keep them updated on shipping statuses. This can help avoid mistakes that may lead to accidental chargebacks such as a customer mistaking your company’s name for the one on their credit card statement or forgetting to cancel a recurring subscription. Using clear transaction descriptions can also help deter these kinds of mistaken chargebacks, as can ensuring that your return policy is well-defined and communicated.