Unfortunately, fraud is a part of life. However, you can manage your fraud and we can help! ClickBank requires our clients to stay under a 1% chargeback rate, as well as a 1% fraud rate. We have this regulation because our fraud rate and chargeback rate with credit card brands have to be maintained under 1.0%. In October 2019, this threshold is tightening even more to 0.9%. To make understanding fraud and fraud rates a little easier, here is an article which covers:
- What Fraud Rate is
- The Types of Fraud
- How ClickBank Protects You from Criminal Fraud
- What are Compliance issues that drive Fraud?
- What ClickBank’s Fraud Rate Offers You
- Why Your Fraud Rate is Important
What is Fraud Rate?
Put simply, the fraud rate is determined by dividing the dollar amount of transactions reported as fraud by the total dollar amount of all transactions. Fraud alerts (or transactions) can occur to refunds, active transactions and chargebacks. It is dependent on the code that is entered by the agent at the bank or through the code that is submitted via a dispute on say a phone app. Credit card brands calculate the fraud rate on a monthly basis, and it is always the fraud dollar amount received in that particular month divided by the total sales amount from that same month.
What are the Types of Fraud?
In the current days of data breaches, stolen cards and online scams; consumers are more nervous about making online purchases. Across all industries, currently the most common type of fraud isn’t necessarily criminal. With cards brands trying to please consumers, they have created an idea that a chargeback is the same as a refund. Most consumers have no idea that what they are doing is hurting the company from which they purchased. This type of fraud is known as “Friendly Fraud” in the industry, which consists of:
- Family Fraud: When a family member makes a purchase and the cardholder is unaware or forgets.
- Delivery Issues: When orders aren’t shipped or tracked but the money has already been paid.
- Emotional Drivers: Customers feeling that they are duped or scammed.
- Misrepresentation: When customers’ expectations are set incorrectly.
- Confusion: Upsell flows that may be confusing to the customer.
- Transparency: Not listing clear terms for recurring billing resulting in the customer getting put into subscriptions they weren’t aware of.
- Customer Service Issues: If the customer doesn’t receive a response, they may feel like they made a bad purchase or have been scammed. Or if the customer specifically asks for a cancellation or refund and is ignored or save a sale attempts are pushed too many times.
How ClickBank Protects You from Criminal Fraud
ClickBank already protects your business by providing fraud protection from criminal fraud. We use our fraud system to block these things from happening to your business. Sometimes this type of fraud can get incredibly sophisticated, which is why ClickBank does not include criminal fraud in the fraud rates we hold you accountable for.
- Account Takeover: When people hack into accounts accessing vital information.
- Stolen Card Rings: Testing stolen cards to look for high limit cards.
- Physical Reseller Rings: Purchasing products and reselling them through other networks.
- Synthetic Card Testing: Looking for any valid card using algorithms.
- Money Laundering: Purchasing high-ticket items with stolen cards and getting a commission on them with legitimate funds.
- Bot Fraud: Using bots to scrape sites, gather information or attack order forms or login pages.
- Habitual Chargebacks: Trying to get free products.
What are Compliance Issues that Drive Fraud?
We take FTC and FDA regulation very seriously and stay up to date on all new information. Our Compliance Team members are highly knowledgable in this area, and we have seen that non-compliant pages lead to high fraud rates. Some of the compliance issues we have seen directly impact fraud rates are below, with some examples of what that might look like:
- Over-promising what you offer – “By using this easy system, you can make money without doing anything at all but the click of button!”
- Not clearly listing terms for recurring billing resulting in the customer getting put into subscriptions they weren’t aware of. Or using bad placement or font so customers can’t see the amount they will be rebilled for the duration of the subscription.
- Upsell flows that are confusing and have vague or very small decline links or no decline links at all.
- Money Making Statements – “You’ll make $500 a day using this product.”
- Expectation vs Reality – What would the average person experience? “You can eat whatever you want, not exercise with our system and still lose weight!”
- Confusing Member’s Areas with no direction and many ads for other products.
- Product Delivery Issues – Are your customers getting your emails? Are they logging into your members area? Are you providing tracking information for your physical products?
- Customer Service: Are you responding to your tickets from ClickBank for help requests?
What ClickBank’s Fraud Rate Offers You
ClickBank’s highest contributor to our fraud rate and yours, is Friendly Fraud and compliance issues.
A chargeback rate will not be the same as a fraud rate. If the fraud rate is very high and the chargeback rate is very low, it usually indicates that there are friendly fraud or compliance issues. A bank may not always charge these back. The fraud could be orders that have already refunded.
If the chargeback rate is high and the fraud rate is high, it indicates criminal fraud or very severe issues with a product. Those charges will always get charged back by a bank and usually within days or weeks of the initial charge.
Specifically, ClickBank may contact you when your fraud rate goes over 1%. We review your account to see what type of fraud it may be experiencing. If it is criminal fraud, we might block bad customers, a bad affiliate, or create a block to stop the issue in our fraud system. If the fraud is friendly, we will then contact you with changes to help.
Why Your Fraud Rate is Important
Your fraud rate is important, as it can have many implications. Not only can it affect your business due to lost revenue in chargebacks or refunds, but it can affect the relationship ClickBank has with card brands. This is also hurtful to your brand as fraud rates directly correlate with chargebacks, refunds and consumer complaints. ClickBank adheres to strict regulations set by card brands to maintain the health of our clients and our business.