Fraud alerts occur when a cardholder reports their card as lost or stolen to their issuing bank. This triggers a process where the issuing bank reviews transactions that may be potentially fraudulent. These transactions are then reported to the card scheme fraud databases, helping to monitor and track fraudulent activity across the payments network.
Issuing banks may flag transactions that deviate from the cardholder’s typical spending patterns, such as high-value purchases, new subscription services, or unusual merchant types.
Visa and Mastercard Fraud Databases
Visa and Mastercard each maintain databases specifically for reporting potentially fraudulent transactions:
- Visa: Operates the TC40 database, where issuing banks report transactions flagged as potential fraud.
- Mastercard: Utilises the SAFE database for the same purpose, tracking fraud patterns and helping to identify potential fraud early.
While fraud notifications alert you to potential fraudulent activity, they are not the same as chargebacks and do not require any action from you in terms of disputing or responding to the notification.
How Should You Handle Fraud Notifications?
If you receive a fraud notification, it’s important to remember that this is not a chargeback and doesn’t require a re-presentment or formal response. However, these notifications can be valuable for your own fraud monitoring processes. You may choose to use this information to review the flagged transactions, evaluate any potential fraud risks, or even reach out to the cardholder directly to check for any issues.
Proactive fraud monitoring can help you prevent potential chargebacks down the line and maintain strong relationships with your customers by addressing any concerns before they escalate.
What Happens if a Chargeback is Raised?
If a chargeback is eventually raised against a transaction listed in a fraud notification, you will receive a Chargeback Notification. At that stage, the chargeback process will begin, and you will need to follow the necessary steps to respond and provide evidence if you wish to challenge the chargeback.
Understanding and tracking fraud notifications is key to managing your business's risk and preventing future chargebacks related to fraudulent activity.