Chemist Warehouse Group is approving more online payments, particularly from first-time customers, since switching from an overly cautious anti-fraud tool that was rejecting genuine shoppers.
The pharmacy franchise said in a statement that its online sales jumped “within days” of ditching its previous card verification tool.
“We realised that although we were containing online fraud losses, we were declining legitimate shoppers and therefore limiting the full revenue potential of our online business,” Chemist Warehouse managing director Jack Gance said.
The retailer has switched to using Riskified, which runs a machine learning-based fraud detection model.
By feeding the model historical and real-time identity data sourced from a “global network of merchants”, it was unlikely to reject legitimate online orders, Riskified said.
Riskified also assumes liability and compensates Chemist Warehouse for any costs incurred by fraudulent transactions that slip through its detection model, or that result in chargebacks.
A chargeback is the reversal of a fraudulent credit card payment issued directly from the bank at the legitimate credit card holder’s request.
Unlike a refund, a chargeback lets the customer bypass the retailer and claim their money back directly from the bank, which then reclaims the funds from the retailer. It is one of the biggest costs of online fraud to retailers.
A chargeback is normally caused by a ‘card-not-present’ transaction such as a fraudster using another shopper’s online account, which they may have accessed through means such as phishing or credential stuffing.
However, Riskified’s chargeback guarantee also covers Chemist Warehouse for the emerging threat of chargebacks made by the legitimate credit cardholder called ‘friendly fraud.’
These chargebacks could be made because of a forgotten purchase, a family member making the purchase, buyer’s remorse or the purchaser may be a “liar buyer” recovering expenses by abusing the merchant’s returns policy.
As well as identifying repeat offenders and purchasers who are a high-risk of so-called friendly fraud, Riskified said it provides automation tools to merchants to support them in dispute resolutions with customers who file suspicious chargebacks.
The Israeli-headquartered company opened its first office in Australia in Melbourne last year. Its other clients include JB Hi-Fi, David Jones and Kogan.