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‘TIS THE SEASON FOR CHARGEBACKS

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‘TIS THE SEASON FOR CHARGEBACKS

Chargebacks can turn massive profits into crushing losses in the time it takes to clarify a chargeback dispute. Don Bush, VP of Marketing at Kount is on hand to offer his tips to spot retailers fraudulent transactions and avoid chargeback disputes.

This Christmas saw a record amount of online sales, over $22.7 billion was spent globally during the festive period and as we all know, but now is the season when chargebacks will begin to occur.

LogoAccording to a recent industry insights from Kount, Fraud causes $100 billion in losses annually. Chargebacks account for most of that $100 billion loss. To put that in to perspective, $100 billion is larger than the GDPs of more than 100 countries around the world. According to a recent BRC survey, fraud is expected “to pose the single most significant threat to retail businesses over the next two years.” Showing us that this is a global problem. Levels of fraud increased by 12% in 2013-14, with 135,814 incidents reported during the year accounting for a staggering 37% of the total £603m cost of retail crime.

This fraud then results in the bane of merchants all around the world; chargebacks. Chargebacks can turn profits into loss in the space of 90, 60 or even 30 days.

A chargeback occurs when an issuing bank receives a complaint from cardholders regarding fraudulent transactions on their statement. This begins a chain reaction of an investigation leading to a customer refund and finally a chargeback to the merchant. The merchant is charged the full value of the transaction, losses the merchandise, and is charged an additional fee that can be up to $100.00 per transaction. Even if the fraud is proven to be false, a merchant may still be charged the processing fees and of course, the product is almost always lost.

This can result in an extremely profitable festive period becoming terminally costly for a merchant.

Don Bush

Don Bush

There are also long term effects for the merchant. Payment card issuing banks know they are at an advantage in this situation so they don’t only charge fines, they may increase their fees if they choose to label a merchant as prone to chargebacks.

At Kount we know how disastrous chargebacks can be to a merchant as well as how much time, manpower and finances can be involved in fighting them.

The number one cause of chargebacks is fraud. So how can you tell that you have a fraud problem? To help you figure that out, here are Kount’s Key Indicators that an online retailer is being targeted by fraudsters:

  1. A Chargeback Rate Above 0.5%

There is no “magic” chargeback rate that is necessarily right for every single business. The acceptable rate for chargebacks will depend on your type of business: i.e., digital goods, apparel, etc. However, a charge back rate that consistently exceeds 0.5% often indicates a fraud problem.

  1. A Decline Rate Higher Than 1%

Online businesses reject an average of 2.8% of all U.S. transactions. Yet the actual fraud rate is 0.9%-1.3%. That’s a lot of good orders getting thrown out. If your fraud screening process cannot distinguish between good and bad orders with certainty—and your decline rate is above 1%—you’re probably turning away profitable sales.

  1. Manual Reviews Exceed 10% of Orders

When chargebacks increase, many merchants fight back by increasing manual reviews, even though they are the most expensive and time-consuming method for reducing fraud, and often cause sales to decline. If your manual review rate has climbed to 10% or more, recurring fraud can be the underlying cause.

  1. Refund rate higher than 1 %

Post-transaction monitoring. Some merchants, especially digital goods companies, will review completed transactions on a daily or weekly basis and proactively refund suspicious transactions. Why? The cost of the lost digital good is usually less than the fees and penalties associated with a chargeback. When refunds start to exceed 1%, fraud may be a cause.

  1. Higher Affiliate Turnover

Fraudulent commissions aggravate fraud losses. For merchants that employ affiliate channels as a sales strategy, a sudden or unusual increase in turnover within your affiliate network may indicate fraud. A typical example is when organized crime rings attempt to multiply their ill-gotten gains by generating fraudulent commissions on top of their fraudulent transactions.

Here are Kount’s top 5 ways to spot a fraudulent transaction:

  1. Larger orders beyond the normal range – Use your common sense, even though a large order will increase your profits, they are more likely to be a fraudulent transaction and will cost you many times this in chargebacks.
  2. Orders with several of the same item and multiple purchases in a short time period from the same card – this sort of unusual activity is a sure indicator of fraud.
  3. Orders made up of expensive items – An order made up almost exclusively of big ticket items should be carefully analysed as it may be an attempt by fraudsters to gain the most profits in one go.
  4. Orders that have been placed on overnight delivery – These should be investigated, especially if they involve multiple big ticket items, as it could be an attempt by fraudsters to gain a massive profit as quickly as possible.
  5. Orders shipped to the same address but using multiple credit cards or different shipping and billing addresses – for obvious reasons this sort of suspicious behaviour is a clear indicator of potential fraud.

At Kount we are passionate about winning the war against fraud and helping merchants all over the world. As we have highlighted, there are very effective ways to reduce chargebacks, meaning that merchants can enjoy as much of their profits as possible without losing them to chargebacks.

About Kount

Kount helps businesses boost sales by reducing fraud. Our all-in-one, SaaS platform simplifies fraud detection and helps online businesses accept more orders. Kount’s turnkey fraud platform is easy-to-implement and easy-to-use. Kount’s proprietary technology has reviewed hundreds of millions of transactions and provides maximum protection for some of the world’s best-known brands. Merchants using Kount can accept more orders from more people in more places than ever before. For more information about Kount, please visit www.kount.com.

Business

Battling Covid collateral damage, Renault says 2021 will be volatile

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Battling Covid collateral damage, Renault says 2021 will be volatile 1

By Gilles Guillaume

PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.

Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.

“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”

De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.

The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.

Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.

Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.

The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.

The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.

Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.

“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”

Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.

SHARP HIT

The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.

Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.

The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.

In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.

Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.

Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.

Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.

It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.

De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.

($1 = 0.8269 euros)

(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)

 

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Business

UK delays review of business rates tax until autumn

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UK delays review of business rates tax until autumn 2

LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.

Many companies are demanding reductions in their business rates to help them compete with online retailers.

“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.

Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.

($1 = 0.7152 pounds)

(Writing by William Schomberg, editing by David Milliken)

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Discounter Pepco has all of Europe in its sights

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Discounter Pepco has all of Europe in its sights 3

By James Davey

LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.

The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.

Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.

“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.

To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.

The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.

Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.

Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.

That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.

“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.

Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.

Sales rose 3% to 3.5 billion euros, reflecting new store openings.

($1 = 0.8279 euros)

(Reporting by James Davey; Editing by David Goodman)

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