Information security leaks and chargebacks

Now British Credit Card issuers in England are releasing all their confidential data on UK customers to small insecure and unknown BPOs in India. God Save the Queen! What wont a nation of shopkeepers do to save a buck and damn the customers. HoHoHo

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It's to our credit
Raja Simhan T.E.

A BPO employee in Chennai tracks credit card frauds in the UK... that's a scene straight out of Xansa Inc's offshore centres in India. High-end BPO services are now coming home to roost.

SITTING inside the Siruseri information technology park in Chennai, Meena is tracking the details of a credit card statement. The cardholder claims he has not made one of the purchases charged to him. This may sound like a routine check. But what is interesting is that the cardholder, whose purchase Meena is tracking, is in the UK and not India.

This high-end service called credit card chargeback is currently offered to a UK-based bank by the Indian offshore centres of Xansa Inc.

India is turning into an important destination for such high-end business process outsourcing (BPO). Chargeback happens whenever a cardholder disputes a credit card purchase. There are a variety of reasons why a cardholder may dispute a charge. These include not receiving the item ordered; not getting what they thought they were buying; the credit card was stolen and the charge was not authorised; and someone simply taking unfair advantage of the chargeback clause.

Xansa checks the veracity of each chargeback claim and helps the bank avoid paying unnecessary refunds. A leading bank that uses Xansa's services has recorded a 30 per cent increase in productivity due to enhanced recovery and a 50 per cent increase in recovery rate, says Amitabh Shrivastava, Director Operations (Chennai), Xansa. The company employs over 1,500 in Chennai, Pune and Noida.

A report by a leading international bank says that in the Asia-Pacific region, chargeback cost credit card members $25 million a year — $10 million for processing and $15 million in write-offs.

Cardholders have the right to dispute any transaction listed on monthly statements. The tracking begins with the customer services department contacting the cardholder. If the cardholder's claim is found genuine, a case is created in the system. The cardholder is sent a dispute form, which he/she completes and returns to the credit card company. Alternately, the cardholder sends a letter to the bank, disputing a transaction on his/her statement. The disclaimer letter is scanned and a case created in the system.

A Xansa employee calls the shop where the purchase was made in the UK, to verify the claims. The end-result of the process could be any of the following:


the disputed amount is returned to the customer, and the credit card company claims the amount from the merchant (or the merchant acquirer);

the claim is denied, and the customer is given the reason;

the amount is "written off" (when there are no existing chargeback rights, or it is a low-value transaction, or the transaction has timed out, or the case is identified as "fraudulent");

the disputed amount is returned to the cardholder and the case is transferred to the fraud department;

no action is taken, for instance, if the merchant issues a credit for the disputed transaction.
The entire process is handled from India, says Shrivastava. For banks, recovery from a single customer may be minuscule. But with the volume of chargeback increasing, the bank loses a substantial amount, he said. The origin of the disputes could range from "card not recognised" to counterfeit cards and Internet/ mail/ telephone orders, he says. Shrivastava declined to give the number of claims that Xansa processes from India, nor the number of employees working on chargeback.

According to Gartner, a research firm, approximately 1.1 per cent of online transactions are estimated to result in fraudulent-buyer chargeback.

That is like paying an extra 1.1 per cent fee on every transaction.

Chargeback risks vary depending on the type of goods sold, but nearly everyone who accepts credit card payments will face some chargeback risk, the report said.

An international bank's report states that in the Asia-Pacific region, online payments worth nearly $3 billion are made in a year. There has been about $25 million worth Internet-related chargeback in this region in 2000, and this is expected to grow to $300 million next year. The incidence of chargeback on the Web are ten times higher than in the physical world, the bank report says.