How a gift card provider cut its chargeback rate

Before prepaid card provider InComm launched a service last year that enables retailers to add a social gifting application to their web sites and Facebook, it had to do something to combat card-not-present fraud. Card-not-present fraud hadn’t been much of an issue for the company in the past because most of its products were used in physical stores, says Niul Bird, InComm’s director of e-commerce applications. Card-not-present transactions are riskier than store-based transactions where a consumer has her card in hand.

“We realized that it would take us years to develop the required tools to protect our customers from the threat of fraud unique to virtual gift cards,” says Bird. Rather than accept such a delay, InComm decided to implement Kount Inc.’s Kount Complete fraud prevention service, which includes both real-time fraud monitoring and a fraud risk analysis program.

Integrating the service took less than a week.

With the system’s sophisticated rules in place to help determine whether a transaction was potentially fraudulent, InComm almost immediately saw a reduction in the number of transactions it had to manually review, Bird says. And, despite the virtual gift card company increasing its number of online transactions, InComm’s chargeback rates actually fell, says Bird. He declined to provide actual numbers.

“We’ve been able to reduce manual reviews while holding the line on fraud,” he says.