May 4, 2012, 9:19 AM

Karmaloop uses social media to fight chargebacks

A check on Facebook stopped five disputes.

Lead Photo

Most consumers who share their latest fashion purchases on Facebook expect their friends to admire how well they look in the clothing. Likely, not many expect the e-retailer that sold the clothing to use these same images to determine if the consumer attempted to fraudulently acquire the items.

That is exactly what happened to one unnamed woman who initiated five chargeback claims against Karmaloop LLC, an online street apparel retailer that is No. 180 in the Internet Retailer Top 500 Guide. Through a Facebook search, Karmaloop was able to halt all five claims, says Thai Khammanyvong, Karmaloop director of customer support and outbound operations.

The effort began with a phone call from the customer herself, he says. “A woman called and said someone stole her credit card and bought a dress on our site,” he says. Khammanyvong was suspicious because Karmaloop had proof the dress was signed for when it was delivered to her. “One of my analysts Googled her, found her Facebook profile and found a photo of her in the dress. She was trying to dispute five orders,” he says. She ultimately dropped all five claims.

Karmaloop’s fraud prevention program, including rooting out false chargeback claims, is not always so hands-on.

Karmaloop uses anti-fraud measures from Retail Decisions plc to automatically screen potentially fraudulent e-commerce transactions. Transactions are analyzed against a database of risk factors, such as geographic locations known for fraudulent activity and bank identification numbers that were part of a past breach. A bank identification number is the first six digits of a credit number that identifies the issuing bank.

Khammanyvong says such screening is vital because he has a small staff of four people to perform manual reviews of transactions. Each specializes in a specific type of fraud, affording them a deeper insight than if they were generalists, he says. Overall, the number of online merchants conducting manual reviews increased to 75% in 2011 compared with 72% in 2010, according to CyberSource, a provider of fraud-prevention services to online retailers that is owned by Visa Inc.

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