The term “friendly fraud” might strike many as a misnomer. It’s decidedly unfriendly for consumers to charge online goods or services on their credit cards and then deny they made the purchase.
The card brand erases the debt, the cardholder gets something for nothing and the online merchant gets stuck with the damages, including charge-back fees and higher processing rates.
But help may soon be on the way from ISOs and agents. DocVerify, An Irvine, Calif.-based electronic-signature company, is soliciting ISOs to promote friendly fraud protection to merchants.
By adding a payment agreement at the checkout, online merchants create a legally binding document that proves the customer made the purchase, says Darcy Mayer, DocVerify chief technology officer.
“There’s little to no impact on conversion rates,” Mayer says, because consumers simply type their names at checkout. That creates an electronic signature that carries the same weight as a handwritten signature, according to federal law.
The electronic signature is binding because it’s linked to the Internet Protocol address of the device used to make the purchase, the purchaser’s email address and, in some cases, geo positioning, Mayer says.
DocVerify also sends a copy of the purchase agreement to the purchaser by email to drive home the point that it’s a legal document.
For a higher fee, the company places an automated phone call to the consumer and asks that he or she press a number on the keypad to confirm the purchase. The call also records the purchaser’s voice print, which Mayer says is as reliable as a fingerprint for identification.
Merchants are free to design the purchase agreements used in the service.
“We allow merchants to create templates that are unique,” Mayer says of the agreements. “They could be anything – it’s up to their imaginations.”
ISOs can mark up the service when they sell it to merchants. The suggested retail price is $39.99 a month, plus 16 cents per transaction for the text-based service. The voice signature service costs the same $39.99 monthly but carries a 79-cent fee per transaction.
DocVerify began as a document security company and later added e-signatures to it services. The idea for the friendly fraud service arose two years ago after a major payments company asked the company to help protect it from such thefts.
“We came back with a product similar to e-signature,” Mayer notes
The company has been offering the friendly fraud protection to the public for several months, he says.
Friendly fraud protection could prove especially valuable to gaming sites, travel sites and online jewelry merchants, Mayer suggests.
The service could help ISOs differentiate their companies from competitors, he notes.
Friendly fraud protection could become one of many value-added services ISOs offer to merchants. Promoting such services can help ISOs and sales agents maintain their relevance to merchants as tech companies enter the industry and put further pressure on processing margins.