Chargeback for Online Payment in Brazil

Chargebacks have become increasingly common for Brazilian e-commerce and online payments. In this article we will look at the statistics, regulations and prevention methods for chargebacks in Brazil.

Statistics for Chargebacks in Brazil

E-commerce in Brazil has grown significantly in recent years, with more consumers being introduced to online shopping and buying more frequently and in larger quantities. This growth, however, also led to an increase in payment fraud in the country, largely due to abusive behaviour by customers considering the country’s regulations and the general lack of security measures applied by e-commerce companies, resulting in large amounts of chargeback from credit card payments.

Current statistics show that 1,08% of all e-commerce transactions in Brazil result in chargebacks, a considerable portion of a market that is worth close to USD 6 billion and has growth figures close to 20% a year.

The causes of chargeback range from common types of fraud, such as purchases made using stolen credit card information, purchases made by family members and not approved by the card owner and malicious claims of undelivered products and purchase cancellations.

Payment methods other than credit cards eliminate the risk of chargeback. Purchases made without using a credit card, however, account for only 21% of all e-commerce transactions in Brazil, and are still vulnerable to product devolution schemes.

Some categories of products sold in Brazil, such as shoes and smartphones, are considered especially vulnerable to chargeback schemes due to the ease the present for resale, and are subject to stricter measures by fraud prevention systems.

Chargeback Regulation

Consumer rights laws determine the conditions for chargebacks in Brazil, which are mostly focused on the consumer side of the transaction.

Purchase Cancellation

Online purchases are allowed to be cancelled at any time before delivery and e-commerce companies are required to contact banks or financial institutions through which the credit card payment took place right away to have the charges returned to customers.

Regret Period

According to Brazilian consumer rights regulations any purchases made outside of a physical store grants customers a seven day period after delivery in which the purchase can be cancelled and have the combined charges like shipping and taxes refunded to customers.

This regulation does not specify in what conditions the returned product must be handled, which allows for abusive behaviour such as not returning the products in good condition or keeping both the product and the purchase charges.

Chargeback Prevention Methods

There are many measures e-commerce companies can put into action that can dramatically reduce the risk of chargeback.

Anti-fraud Systems

Some systems analyze customer data to check if purchases are legitimate or fraudulent. The processed data is most commonly crossed between the submitted information for delivery, previous purchases information and databases from some institutions. Data checked through these systems are, for example:

• Name and ID document
• Postal address validation, based on CEP database by Correios and previous purchases
• IP address location
• CPF and financial situation, based on Receita Federal and credit evaluation companies like Serasa
• Type of product, some of which have a higher risk of fraud

Anomalies in these parameters are commonly found before purchases are completed and don’t give clearance to its completion. Their effectiveness, however, is mostly limited to pre-purchase and checkouts and have little purpose after products are shipped.

Payment Intermediators

Some payment intermediators in Brazil claim to offer a zero risk of chargebacks, but may in fact increase their service charges if these become increasingly common.

Reports by Brazilian customers also indicate that security measures implemented by these services to cut back on the risk of chargebacks have led to a growing number of rejected payments.

Additional Measures for Physical Goods

When making deliveries, some additional measures can help decrease the risk of chargebacks in cases of customers who claim to have not received the ordered products. These are:

• Measure shipped items in great detail, including size and weight and present them in cases of claims of incomplete deliveries
• Order a Delivery Notice, or Aviso de Recebimento in Portuguese, from Correios to have detailed information about who received the product and when the delivery took place
• Contact customers by telephone to confirm purchases that exceed a determinate price as to reduce the risk of costly chargebacks