You might at times notice chargebacks on your payment gateway. A chargeback is when a guest has challenged a payment on their credit / debit card, where the bank has sided with the guest, and has agreed to return their funds.
When a chargeback happens, the bank will come to you to cover the cost returned, unless you can prove the order wasn’t fraudulent and the guest received their goods - this can be known as friendly fraud when guests abuse this system in this way. This will also happen via your payment gateway provider who holds these funds.
You aren't liable however for chargebacks for orders made with cards that are 3D Secure enrolled. In these situations the chargeback shifts away from you, the merchant, for payments taken from within the European Economic Area as they need to meet the SCA regulations. Find out more about 3D Secure here.
In possible fraudulent situations, we suggest that as soon as you suspect an order is fraudulent (after investigating and believe it’s identity theft) that you remove the balance from the gift card so it can’t be spent, and refund the guest to reduce the chance of a chargeback.
You might want to consider adding something to your T&Cs that explains that in the suspicion of fraud, you may cancel or adjust gift card balances without warning so you’re covered.
In legitimate circumstances the guest will likely contact you to ask what’s happened where you can explain further.
When you believe a chargeback is friendly fraud we suggest communicating with the bank and sharing evidence that the gift card has been issued, delivered, redeemed, etc., as you can dispute and challenge these. Remember to check with your payment gateway how they suggest it is best to challenge chargebacks on their platform.
You might get friendly fraud for a few reasons, such as the guest believing they haven’t received their goods - digital gift cards in spam, or orders lost in the post, or because they don’t recognise the transaction reference.
Getting hold of the guest to rectify the situation, replacing anything missing as well as explaining any confusion here will help - this could also be shared with the bank as evidence if you feel it will help your challenge.