German payment intelligence company Fraugster has teamed with French PayTech Worldline to deliver a chargeback protection solution for travel merchants.
The solution eliminates chargeback losses for merchants by taking full liability for fraudulent transactions, the companies said in a press release Tuesday (Aug. 2). It also leverages artificial intelligence (AI) trained on global payment data to make more accurate decisions and boost approval rates.
As Fraugster noted, COVID-19 drove a change in fraud patterns and consumer payment behavior that adversely affected the travel sector, and data inconsistencies have made it harder to identify certain types of fraud.
Ferran Llompart, corporate treasury director at Iberostar, commented, “Iberostar experienced a massive increase in fraud pressure during the pandemic. We were pleased that partners Fraugster and Worldline were able to act so quickly to design a new AI model specifically for us.
“In a few short months we reduced the Chargeback rate from 2.76% to 0.07%, which was a fantastic achievement.”
Credit card chargebacks and the resulting revenue loss are major headaches for merchants, according to “Dispute-Prevention Solutions,” a PYMNTS and Verifi collaboration based on a survey of 301 merchants with annual revenues between $20 million and more than $1 billion.
Read more: Dispute-Prevention Solutions
According to a Fraugster analysis, the total cost of managing chargebacks has risen to nearly three times the original transaction value. In a travel industry where average order values are in excess of $750, this implies a total cost of over $2000 per fraudulent transaction.
“Fraugster’s approach to addressing chargebacks is to use a combination of machine learning and behavioral science to build a sharper picture of the transaction in question,” said Fraugster CEO Christian Mangold. “This means merchants can provide a more seamless buying experience for legitimate customers while also preventing fraudulent transactions from getting through — this includes transactions that may turn into chargeback fraud later on.”
Mangold added, “We are pleased that global brands have increased their revenue of between 5-16% since adopting Fraugster’s Chargeback Protection solution product and report a steadier and more predictable financial coverage for chargebacks and bottom line impacts.”
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