Scott Adams Reveals the Chargeback Problem No One's Talking About

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Hey everybody, welcome to today's episode of B2B Vault, the Biz to Biz podcast. We talk about payments, fintech, business, entrepreneurship, and all, all things business. And we want business owners to Check out today's episode. We're going to be talking about chargebacks, VAMP, how to prevent chargebacks, how to deal with them in the e-commerce world. And today's guest is Scott Adams from Fraud Deflect. So, Scott, welcome to the show and introduce yourself to the audience.

All right. Thanks for having me on. Hey, guys, I'm Scott Adams. With the CEO, co-founder of FraudDeflect. So I've been, you know, a merchant and an entrepreneur for 25-something years now. Started out as an engineer, just got lucky, right? The internet, met the right people in the right place, right time, and ended up running a company, taking it over from a husband and wife who started it just like many of you guys, you know, in their house, in their garage, and didn't— in this case though, they lucked upon the internet and no idea what to do once their business took off. So brought me in, I fixed a bunch of IT things, and that's also when I discovered chargebacks, you know. But after that, you know, we grew that business, exited, got to around $25 million a year, up from around $4 million a year when I started. Then I became a merchant, got hired by a company. If you happen to play video games, called Riot Games. They make League of Legends. Was there for about 5 years, took them from tons and tons of chargebacks to very few. And then when they got bought, similar thing, ended up actually at Epic Games. If you didn't know Riot, you know Epic. If you don't know that name, you do know Fortnite. If you have kids, you've seen a kid, you know Fortnite. Same problems, though, right? They have a bunch of chargebacks.. And something I learned early on and has been reinforced every company I've helped, you can be a, you know, million-dollar-a-year company or a billion-dollar-a-year company. It's the same problems, you know, different number of zeros, but the same problems. And, uh, you know, so it's with them. And then through that though, we ended up meeting a lot of people, um, along with that in conferences at, at Visa, found out about a program called VMTI, which is a predecessor to a lot of the things that we use today. And they asked me to be one of the first to use it. So we grew that within about a year and a half, sold the business built around that to Count and Equifax. And then on to the future, we— I left there after Equifax had acquired us, consulted for a while and came back to the same conclusion that chargebacks are a pain in the butt for merchants and they need help. And so that's kind of why we started FraudDeflect.

Yeah, you know, merchants, you know, no matter what size you are, you know, whether you're starting in business, whether you're in business growing your business, you know, blowing up, you know, your company, you know, you have to have a plan from the beginning, you know, how to deal with chargebacks. And, you know, a lot of times, you know, and there's— and today, you know, we're dealing with like a couple of different issues because we have merchants that sell physical goods.

Right?

So there's a set of rules for them. But then we have this growing area that's like on fire ever since COVID of, you know, the digital part of e-commerce, SaaS companies, digital products, AI products, you know, where it's just digital. It's not— there's not a physical, you know, we're not taking this and shipping it to somebody, you know, to somebody's house. You know, so that's, you know, that's a whole nother, whole nother ballgame, you know, in the, in the world of, you know, merchants on how they deal, you know, how do you deal with physical products and how you deal with digital products. And one of the things, you know, I always tell my merchants is, you know, you've got to have some kind of programming in your system. So when somebody orders something, You know, you guys are looking at the address. You're not shipping to mailbox stores, freight forwarders, ghost addresses, you know, mailboxes. And because that, that, that can just result in a chargeback because you're not shipping to an actual address. And that's, that's, that's a huge, huge problem. In that world, you know.

And then those cases, huh? And saying in those cases, so you're probably not shipping to a real person either, right?

Yeah, but they don't know that, you know. Or you get an order in, like, like we had a cigar merchant one time, they called me, go, do you think this order is real for 10 humidors? Uh, you know, you need to call that person on the phone. 10 humidors, like, go visit them, you know. Are they gonna— that's a lot of real Is it a real business, you know? And, you know, that's happened to them 3 or 4 times. Once it was actually like a company and they actually wanted to buy 10 humidors and they wanted to custom, uh, their logo on the box, and it was a real customer. The other ones were all fake, fake, and they were literally about to get— literally about to get scammed.

Yeah, we had one That one is a Riot Games, one of the funny ones.

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Was that very similar to that? Like I always told the team, you know, if it's too good to be true, you know, it's always been the case, right? It might not be true. But being that we work in fraud, we see a lot of things. And so, like, you never know. So you got to research. And so one day I walked into the office and just walking through the hall and one of my fraud analysts grabs me and he says, hey, I just got this order. I'm going to ban this guy. He's trying to buy, you know, thousands and thousands of dollars of Riot Points, which were the in-game currency. And I said, okay, you know, probably a scam, but— or probably, probably fraud, but let's check it out. And so I went back to his desk, we're looking, and it's from Abu Dhabi. And we looked at the account, and the guy bought a lot of stuff. He basically had everything that we offered, and that was tons of money, like, you know, thousands and thousands of dollars, and of all in-game things, right? So virtual items. And so I said, I said to the guy, I said, hey, email this guy, see if you can get like a video call. And within like 5 minutes, the guy emails right back and sends him a Zoom link. And then we said, hey, actually use ours. You know, so we sent them a link.

He—

they— they have— we have a video call and talk to the guy. And he's just— you, you know, it felt like you could trust him. He was definitely in a place, you know, this was before AI was so good. So probably definitely in Abu Dhabi in a palace of some kind.. And the guy said, look, hey, I'm, you know, I know this is a lot. I'm not surprised your fraud filters caught it, but it's real. Like, I'm a prince of something and I want my whole entourage. I don't remember his words, but basically he had 10 people that he basically said, hey, you're going to play League of Legends with me. And he knew there was a big sale coming up. And so he was stocking up on Riot Points so he could gift his team or his entourage or whatever they were, his friends. All these, these skins so they could play together during the holidays. And it was like right before Christmas. And so, yeah, so we let it through. You know, it was nicely in this case, as you were mentioning, right? It's a virtual good. So the risk is really low, right? Worst case, we give this money back, right? Or, you know, we give the cardholder their money back. It's just fraud. And what are we out, right? We have very little incremental cost there.. But yeah, this is probably— we actually ended up giving a great experience to a very loyal fan and a gamer, and, you know, never got charged back. And sure, a lot of those could be a scam, especially nowadays with AI, but sometimes it's good, you know, you don't— especially virtual goods. I always say, you know, unless you're in big trouble with chargebacks or something, err on the side of helping your player, err on the side of helping your— helping your consumer, give them a good experience.

Yeah, I think a lot of times when I talk to digital merchants, they're like, oh, but these people want their money back or they claim that it's fraud. And I'm like, it's not like you guys shipped a watch to somebody or a $1,000 item. This is just air, you know, and you got to like not take it so personally, you know?

Yeah. Like there's definitely, you know, there's costs in making that stuff, but it's sunk cost, right? And so, you know, digital is definitely very different from physical. In that way for sure.

So what, like when it comes to like friendly fraud, what kind of advice would you give a merchant selling digital goods, not digital goods, physical goods? What kind of advice would you give merchants selling physical goods so that they can watch out for fraud and try to prevent fraud at their business?

Yeah, you know, it's really in a way it's mostly not that different from digital. Like, so, you know, I approach it depends on where you're going, right? So we generally say because, you know, the ecosystem nowadays has so many tools out there, so many models, they're all running, right? So the card brands have models running, the issuers have models running, the acquirers are running models. They're all trying to stop all that real fraud, right? So the criminal side, but it's really hard to catch friendly fraud. So I would say kind of two things. I say one, pre-auth and maybe a little bit early post-auth. So just, you know, I don't know. I know you're saying we're talking to business owners here. So just in case, you know, pre-auth, let's say before they press the order button or right after they press it, but before the transaction goes to the card brands, goes to the acquirer or hit your gateway, that's the pre-auth side. So in there, think about business rules. What makes sense? Right. So like you told the story about a guy with ordering 10 humidors, right? Does your business normally get orders for 10 of your product? And if it does, if it doesn't, should you allow that to go through? At least not without review, right? You know, you can manually review, especially on a physical good, you know. So think about business rules. Don't, you know, don't bet on, oh yeah, you know, 1 in 1,000 orders fits this criteria. You know, so maybe that 10 humidors, but think about the things, what does, what do 99% of the orders fit? So should they ever order 3 of your thing? Should they order 1? You know, what's, what's that? How about the cadence? Maybe it's something that's, that's, that gets used. Consumable would be the word that I was looking for there. So if it's consumable, what makes sense, right? Maybe it's a family and they're all using it. But again, do they need 10 boxes of the thing? So think about these kind of things, dollar amounts. Does it make sense? You know, it's like, this might sound a little bit old school, but I find that the old school stuff works. Just don't be too tight with it, right? So be too tight, but don't be too loose. So think about, just really rack your brain. If you've got a data analyst, look at your data, what fits the 99%? And that, do that pre-auth. And if it's too slow, Remember, you can always void. So that's why I say then secondly, think about post-dial. So you've already taken the transaction, you've approved it, but ideally it's not settled yet, right? I don't know your setup, but probably you've got 12 hours. So in the next few hours or 12 hours or something, or check with your, with your, your PSP on when, when they settle versus capture and you can void. So maybe something takes longer, maybe the API calls are slow, maybe you want a manual review, you know, so physical good, more manual review.

This is what I always tell merchants, like, be careful with like pre-authing cards, right? And then not settling those pre-auths because then when the cardholder comes back and it's not the same transaction, you're going to get— you're going to trigger a lot of declines.

Yeah, yeah. And that's to be clear, that's not what I'm saying.

Right.

I'm saying auth it and probably let it go through if it doesn't. But then if some reason the first 12 hours you decide, you know what, this probably is fraud, you can void it and you never take their money. Now, I do have merchants that tell me, hey, we want to do this funny way where we auth something, we wait 2 weeks. Well, that's not going to work, right? That's going to get declines, that's going to get chargebacks, all sorts of problems. You might re-auth at that point, but then it looks like a second charge to the consumer. So I never think those are good ideas, you know, but flip side in the physical good world, right? Generally you don't actually take the money until you ship the product, especially if it's going to take a while because that gets into things called future delivery, which also causes chargebacks. So you just got to be careful if you're going to, you're going to auth and then ship or then, then capture. You got to do it in a few days. You can't wait weeks.

So we have a client that's like had an issue, so we went into their setup, and so any card that was over a certain amount of money, we had it go into the queue. So it— the, the gate hit the gateway costing you whatever, 5, 10 cents, right? But it didn't, you know, and you got an auth, which that was another 10 cents, right? But you didn't pass the transaction to go through to settlement. So then these large transactions, which they get like maybe 3 or 4 in a week, right? And then they're able to email the customer, call the customer, verify the transaction. If it's verified before the batch settles, they can let it go. You know, they just click the button, let it go through. If it's not, they click the button and void it out. And, you know, I was explaining to them one time, don't let them go through and then issue a refund. Because sometimes you're issuing a refund that the actual real cardholder is doing a chargeback, and then you got to make sure that you're sending in the sale receipt, the void receipt, and you cost yourself money. Let's just say whatever, round money and time, 3% on a $500 or $1,000 sale. You paid that juice, you're not getting that back, right?

Yep, yep.

You're not getting that money back. So now— and then you took the time of your staff when they could have just hit a button and eliminated all of that. And then they're fighting the chargeback to go, oh, well, the person's card went through for $1,000 and here's the refund, so there shouldn't be a chargeback, blah, blah, blah, blah, blah. And then your money's gone and now you got to wait and get your money back. And, you know, so you got to— you got to really manage, manage this stuff well.

Well, the review's got to be fast. If you're going to do anything like that, you got to do it like I say, before it settles. Technically, you can do what your customers say, obviously, but it creates problems, you know, and that's what, like, you know, in a way to continue on that, that vein. And the other thing I suggest is like, you know, one of the things that we do a lot of fraud deflect is we work with the card brands and issuers so that we can share information during that customer support call. So for example, what you just talked about, that's a really common use case where it doesn't have quite as much now, but it still does happen where, you know, the issuer doesn't know you did a refund, right? You think it feels like it's all instant because you're pressing buttons and you see it in your dashboard or whatever, but it could still take 4 days for the issuer to get it. It could take weeks if it's international. And so because of that, delay. Yeah, they'll let the consumer do a chargeback. And sometimes this becomes a scam where the consumer will do a chargeback or do a refund and then immediately call Vishwa and do a chargeback. There's no way they know about that yet, right? It's got to go through multiple batches. It's got to, you know, as much as it should be instant, it's got to go around the globe and it's going to take a while.

So what we can do is think like, because we're in this like instant society, Right.

Yeah, it's so easy to think I did it.

Well, why didn't they see it? And sometimes they don't see it. Or let's say it's even a debit card and then some banks don't even look at these debit cards except once a week, you know?

Yeah, it takes time. And so that's why what we can do though is like, let's say the consumer calls in to the issuer after they've done the refund. We know right away for most our partners that a refund happened. And so we can actually tell the issuer in real time Hey, a refund happened on this. Here's the, the AARN, here's all their information. And then they will not do a chargeback. They'll push back and they'll say, hey, consumer, look, I see that the merchant says they refunded this today. Sorry, but you got to wait a couple of days and it'll show up on your statement, you know. And then on top of that, we can send other information. We can send anti-fraud info, we can send shopping cart info. So think about, you know, you mentioned friendly fraud. Think about some of the common reasons for friendly fraud. Like, you know, it's for any industry, but I mentioned video games. It's an easy one to talk about. And I can tell you, actually, when I was at Epic, when I started there with Fortnite, their descriptor, if you guys, you know, know what that is, right? The words that are on the credit card statement for the transaction, it said Epic Games. Now today everyone might know it because of things in the media, but back then nobody knew who Epic was. Unless you were a hardcore gamer on, you know, a PS2 or something. But if you weren't, if you're just a mom or a dad and your kid was playing some video game, you didn't know who Epic was. You knew Fortnite because the kid wouldn't stop talking about it. You didn't know Epic. And so because of that, again, you know, that happens a lot, right? If you're a mom-and-pop, you're a new business and you don't have someone like Allen Kopelman on your side telling you, you know, you don't want Mom and Dad Inc. .com on your website or on your descriptor, you want to put your product name or something the consumer would recognize.

Yeah, we even have like clients and they might have like 5 or 6 digital products and then we'll go, okay, well, you need to use this gateway versus this gateway so you can go and set up 5 dynamic descriptors. So when somebody purchases Game A, it says Game A, Game B. Getting C and you're going to end up— and we did that for our client, one client, and actually we reduced chargebacks by like 95%. They were, they were like shocked. They're like, what? That was it?

Yeah, well, that's, that's a lot of— if you think about friendly fraud, right? Some of it, you know, I always say probably, you know, you've ever watched anything I've done before, I say this kind of thing a lot because it just happens all the time, is, you know, that, that problem people don't always know, right? There's friendly fraud and there's friendly fraud, right? There's friendly fraud that it's actually friends, it's actually customers. And in this case, right, they didn't know the descriptor, right? They're confused. Maybe, maybe the spouse bought it, maybe the kid. You know, it doesn't mean it's fraud. It just means they don't recognize.

We just also tell people, put the phone number in your descriptor so that people can see the phone number. I hate it. Like, I'll get a— I got a charge on my credit card recently. I was like, what is this company? So I Googled the name and I was like, oh, okay, now I know who that is. Yes, right.

But there's no phone number. Yeah.

And I had another one that came through with a weird name and there was a phone number and I called it up and I was like, I never did business with you, blah, blah, blah, blah, blah. And then it turned out, you know, when I was talking to them on the phone, they're like, oh, well, that's our corporate name and you bought this, this. And I was like, oh, okay, well, that's weird. I actually tried to sell them merchant services.

Because they need, they need dynamic descriptors.

I said, you guys must be having a lot of problems because it's also one company with some multiple different websites and they're not letting people— they're just checking out to the corporate name and it's very confusing. So another thing, you know, merchants don't understand about— want to talk about two things. So because we're going to— we don't want to be like an hour talking, but we can do this for hours, I'm sure. Yeah, VAMP is a huge discussion, but the other thing is, is when I was doing the demo and learning about your company, you guys have like this one step in front of where fraud happens, right? So let's talk about that, and then let's talk a little bit about VAMP. I don't think people really understand VAMP, but you know, I was explaining to somebody yesterday, I go, if the bank goes over their VAMP, like your acquiring bank where your merchant account is at, then that flows down to the ISO. Not just ISO, all their ISOs, and then that flows down to all their merchants. I don't think it's truly fair for the way that's being— the way that's happening right now. But like they say, poop rolls downhill. And I think that's a— that's a kind of a huge problem with, um, with Vant. But let's talk about your— the— the what makes FraudDeflect special, because there's tons of chargeback companies out there, right?

Oh yeah.

But I saw this one thing in the demo that was really the differentiator of your company?

Yes, I'll give you two things. So one, like I— before this, before we started recording, I was telling you, you know, my background and how, you know, a big thing about all this is just being passionate about helping, right? We truly started this company to be transparent, to be trustworthy, to help our merchants. And, you know, I was— myself and a lot of our our team, we were all merchants. And so we, we were merchants long enough that at heart, that's who we are. So I can't not think like a merchant. And that's true of most my CX staff, a lot of our other team, right? That's, that's, that's one that sets us apart. You know, you hear that, but are they really that passionate? Have they been doing this for 25 years? You know, believe it or not, makes a huge difference. Now technology-wise, so we do not set out to sell alerts. We didn't set out to do representments, and we do those things.

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Those are kind of insurance and stopgap situations. Now, they're good products. But where we focused is, you know, one, on the ability to gather information at the point of checkout. And so we have a product we call FDID that is a behavioral device fingerprinting technology. That lets us gather information, nothing that's, that's, you know, secret or PII, but things that we can use to model to show this is probably not fraud or it is. Now, secondly, what we do is that there's products out there that allow you to communicate with the issuer in real time before they press dispute. And so we focused mostly on that and optimize around that.. And by doing— and we call this a deflection. And so what we can do is that let's say, you know, we mentioned it earlier, sort of if the— when the consumer or the cardholder calls their bank, so, you know, they, they think they might be calling Visa, but, you know, it's Citibank, it's Capital One, it's one of these issuers. They call into that, that system, they pull up that order. What shows up on the screen? Unless you're using our service, it's, it's nothing. It's literally that corporate name. There's no description of what you bought. There is no description of you, of anything. But what we can do, literally, we have access to hundreds of fields of information that we can pass forward to Dishware during that phone call. And so what we do is we'll take, you know, the consumer name, the email address, the website they bought from. We'll take things like the whole shopping cart. So, you know, let's say that you went to, you know, whatever store online you bought 5 things, we'll pass that information up. Now what this allows us to do is now the rep at the bank can play customer service for you. They can say, you know, hey, Allen, you know, it looks like, you know, I know you don't recognize this, but do you know this person? You know, Mrs. Kopelman? And he said, well, of course I do. Oh, well, so does she ever shop at the store? And did she maybe recently buy these 5 things?

Oh, shoot.

Yeah, I asked her to buy those, you know, so sorry. Oh, you know, thanks for your help. Hangs up. There's no chargeback, there's no fraud, there's nothing that flows down to the acquirer level or to Visa or MasterCard. And so because of that, your chargeback rate goes down, your fraud rate goes down, and thus we're going to talk in a second, your VAMP rate goes down and we optimize around doing this part of the system. And then on top of that, we have the alerts and those kind of products that if the deflections don't work, we can still stop the chargeback before it becomes a chargeback. And that way it doesn't impact your chargeback rates. But in the beauty of the deflection, though, is there's also no refund, right? You just saved your sale. You have a happy customer. Now, also, though, let's say that you did do a refund or that, you know, the refund already happened. And you don't see on your statement or, you know, something like this, like if you're a merchant, let's say the consumer did that refund already. But like the example earlier, the issuer doesn't know yet. So if the consumer does try to call in and get a refund, either to scam you or legitimately, it's been 2 days, where's my money? Right? They don't understand. So they call the issuer. We pass up, hey, this was already refunded 2 days ago. Here's the tracking information. So most likely, again, the issuer says, no, you can't do a chargeback because we know a refund's coming. And so there again, no chargeback, no fraud. This case, there was a refund, but it would have also been a chargeback and been a big mess. And that's kind of where we focus.

That happens more often than people think.

You know, it really does.

It happens a lot. One thing I think merchants don't understand about chargebacks, and I was trying to explain this to a merchant recently, And they were like, no, that can't be. But see, you're an expert, so it's not coming from me. So I tried to explain to them, I go, the consumer customer is doing a chargeback. They contact their bank. They say, I'm charging back $500. I didn't get whatever it was. And then you send in your evidence to, to, to us, which goes to Merlink or whoever is doing the chargebacks. Goes over to them, then that information goes back to the consumer's bank, and they're the one who ultimately is the, the judge and the jury on the chargeback. And I said, because I told the customer, I said, up to me, I look at it, I go, you win, you got a transaction, you delivered the goods, there's the tracking number, boom boom boom, you win. But I'm not the judge or the jury. The ISO is not the judge or the jury. The acquirer is not— doesn't do that. It's ultimately the cardholder's bank. It's not even— there's no third party. The only third party is the person passing the information around.

Yeah, unfortunately not very fair situation, but it is what it is, right? So that's what we think of like, you know, this deflection process is pretty good because it lets us share that information and show the issuer, right? Because the issuer doesn't want chargebacks either. It costs them money. I used to say it was like $50, but someone told me recently at an issuer that it costs them $150 for every chargeback, even if it's a $10 item, just because of the man-hours. And they don't want it. So what I, you know, I kind of jokingly say, but it's true, it's like I'm almost— I'm sending the information forward as if I were representing. That's what goes forward in real time before the chargeback happens. And so based on that, it's like I'm almost saying like, issuer, I dare you charge me back. I'm showing you my hand. Why would you do this? And thus it works, right? As long as it is a good transaction, if it's not fraud, we'll, we'll deflect it many times. If it's fraud, we'll deflect it because we're just showing we have enough information to, you know, beyond a reasonable doubt. So we end up winning that way and we have a really good success with that and drives down those rates that you don't want to be high.

Yeah, it's, it's, it's difficult when I, when I have to tell a merchant like, hey, you lost this chargeback And they're like, what do you mean I lost a chargeback? We did everything right. And I'm like, nothing like we can do about it.

Not a fair system, unfortunately. And, you know, the other thing I remind merchants too is that, you know, talk about the time between the time that you hit the refund button and the issuer gets it. You know, you mentioned Tesis, like all these backend processors, what consumers and merchants don't realize most of the time, it's many, many computers, mainframes, it's batch files. It's, you know, you don't mess with things that work right in the IT engineering world. And when you're dealing with billions of transactions a day, like some of these places, it's not easy to upgrade. So they have a lot of systems that are, that are, seem pretty old, but hey, they make all this work that we rely on every single day. But you got to remember, there's multiple parties in place. There's a bunch of batch files. There's a bunch of things that don't happen in real time. But more and more we train the consumer to think, hey, the minute I press this button, things happen. And thus, you know, we end up in this situation too.

I always tell people, you know, we talk about faster payments, you know, and people think like, oh, all this stuff is happening like instantaneously, you know, like, oh, I hit the button on Zelle and the person got the money in their bank account. But a lot of people don't realize, like, the person who— that's why I tell people it's so important to have two-factor authentication. Set up on all your banking and everything. Oh yeah. It kind of even upsets me when, like, like from the credit card standpoint, why credit card systems on the whatever we want to call the legacy credit card processors, you know, don't have some kind of system where like, oh, you're doing a charge now, it sends you a text message to the phone you have registered with your with your credit card and gives you a whatever, 4 to 6 digit code, and you got to go punch it in to kind of like okay the transaction. And I've seen this recently on some websites that I'm purchasing from, and it says, oh, we're sending you a text message to authenticate your transaction, and then you got to fill this in. I mean, I just think that from a standpoint like that's got to just be like across the board.

You know, it's got to be like part of that 3DS secure, you know, part of that 3DS secure in some cases, sometimes it's private. But, you know, but the problem with that is, right, we had— if you were a merchant 20 years ago, you know how bad 3DS was. Like I used it, it was, it was, it saved my business for about 3 months until it tanked it. You know, and so now people are scared. Now it's used in Europe a ton, but it's not used here so much. And I think it will over time because it is a way better— 3DS Secure is way better now. And plus, yeah, you can do it privately as well. Like we're actually— that's something we don't have completely done yet, but we're working on some solutions around that where we could text, email, those kind of things to confirm the transaction. Now it doesn't make you— you have to do it as a consumer and as a business, as a merchant, you don't have to listen. But it's another data point, right? Did you get that interaction? I mean, I think we'll find that it does lower fraud quite a bit, but it probably depends on the industry too.

Yeah. Another thing is, I mean, in the United States now we have like, I think we're at an all-time high on identity theft.

Yeah.

And there's just a ton of identity theft out there. I tell— I had a couple of merchants recently that came to me and they were like, oh, my credit card processing got shut off. And I go, for what? I said, when's the last time you checked your credit? They went— one guy checked his credit and there was like 30 or 40 inquiries for everything from mortgages, car loans, credit cards. Basically, somebody got his info.

His info's out there. Yeah, really, though, all of our info's out there, right?

Everybody for— yeah. So, you know, that's why you should have like Credit Karma or one of these things on your website so that— on your phone— so that you're monit— if somebody opens up a credit card, boom, or somebody does an inquiry, you get notified, email or text message or however you have it set up, so that you're, you know, you're in control of that, you know, so you don't have this kind of fraud. But, you know, merchants, they have no way to know that, you know. Yep. About how that's going. So if you were going to give advice to a new business owner about how to deal with fraud, what would be— what would be a couple of pieces of advice you would give someone starting a brand new website out? Like, what should they— what should they be doing? Yeah, it's—

it maybe sounds a little self-serving, but you need to work with somebody day one. So and that could be, say, you know, Allen's company here, just a good payment processor. Don't just go to your bank, work with a processor that understands, that knows this stuff. They'll give you good advice. You know, hopefully they say use FraudDeflect, but even if they don't, just somebody— you need somebody that's a pro at this stuff. The things change too fast. The regulations come down from Visa, MasterCard, laws change. FTC. There's so many things going on in this world. You can't hope to keep up with it. You got to choose, you know, do you want to be an expert at your business, whatever your business does, or do you want to be an expert at payments and fraud? Right. You know, I ended up— I was running a business. In the end, I went the fraud direction because, you know, I felt like that every time these things happen, the merchant ends up stuck with the problem. Right. We have to pay for it as merchants. And like, you know, Allen was saying, like, damn, it's so unfair how it works right now that it— now this is the first time ever that it's hit the acquirer and it really impacts that acquirer. And then based on their rates, it can then impact the merchant. And so because of that, we have to think about it in a different way. It changes the game a lot. And, you know, if you don't have both a payment processor and ideally a you know, some kind of fraud, anti-fraud, chargeback provider that's an expert at that, you're already starting out in a bad place, you know, because now— because we were talking earlier before the show that, you know, when you start a business, this is not what you think about, you know, and that's what I'm telling you. Don't think about it for a second. Get a good PSP, get a good fraud provider. Now you grow your business. It'll save— it'll save you so much money and time later. It might seem like a waste because, oh, who's going to defraud me? Right. Kind of like we just talked about with the— with ID theft, right? Your information's out there. It's— credit cards cost about 30 cents on the black market with $1,000 on them, proven, right? So it's not hard to get your card numbers. It's not hard to get frauded. And oftentimes, unfortunately, it's the little guys that get hit hard because you don't know. You don't have anything in place to protect you.. And so if you don't, it's easy to defraud you. And then that's where they test those cards. Once the card works on your system, then they sell it for more money and they go to Best Buy or a big box store and buy a big TV, you know, or they use it in other places to commit fraud. And so, you know, start— don't put a ton of time into it. Just make sure you've got good people on your side, then build your business and grow. You don't have to worry about it.

Yeah, like we— that's, you know, the main reason why I started. My company was, you know, I was a merchant. I owned a restaurant, I owned a catering company and a consulting company over time. And then I got into the payments business and then I worked for somebody and opened my own company because we like— I like helping business owners. And, you know, so I always explain to them, I go, you know, it's not one size fits all. You want to work, you know, if you're selling whatever, Nutra, or you're selling telemedicine or you're selling whatever toys, right? You need to go to a credit card processor that understands your business because understanding that you want them to understand, work with clients who work, who do that, because a lot of times merchants will come to me and they're like advertising name brands on their website. I'm like, well, you know, we have to show the bank that you have agreements or how you're getting this stuff. And they're like, what do they care? We're like, because that's, that's the rules, you know? And a lot of people don't understand, like, you got to, you know, there's certain rules that you have to follow, you know, and then that's going to, you know, so you want to work with, you know, you want to work with somebody who's going to explain those to you. So, you know, so you're not calling me going, yeah, I got shut off and now I need to fix this. And then we're like, well, you have all these compliance issues to fix, you know? And then some of that could have caused chargebacks where you're getting a bunch of chargebacks because your checkout page doesn't have checkboxes on it. You don't have clear information about shipping and returns on your website. And it amazes me how sometimes these sites are processing hundreds of thousands of dollars and then all of a sudden, boom, some scammer finds it. They go write about it on the dark web and then you're getting hit by a bunch of scammers.

Yeah. You know, one thing I'll throw out there too, Allen, I think I was having a— I was having a chat with some merchants a while ago. Two super fast things to add to that is that one, even if you're, you know, even if you follow my advice and you don't specialize in front-end payments and you get people that do to help you go to a conference once a year, every 2, 3 years, there's a— I'm actually on the board of one called Payments Ed. That's a great one, but there's a lot of them out there. And just to understand a little bit more. And that's where I met a lot of the people that helped me do business today and keep me in the know and understanding these things. And secondly, speaking of that, like at one of these conferences, one of the best payment processors that I've worked with, and they've been bought and sold a long time ago, but their CEO and I— CEO and I were talking one day and he just blew my mind. I had no idea, but this changed how I looked at things. I didn't know that the acquirer and the ISO, like, you know, you like your business, Allen, you guys are on the hook if the merchant goes out of business. So, you know, entrepreneurs out there, if you had a business, you're processing credit cards, Allen or somebody connected to Allen, they have to pay for all those refunds. Every single refund, every chargeback, all those fees will get paid for. And it's not going to be by Visa, MasterCard. It's not by the issuer. It's by Allen or somebody an ISO, an acquirer, a sponsor bank, you know, somebody's paying for this. And like, I didn't realize that. I figured, oh, the merchant goes bankrupt, the money goes away, you know, nobody gets it. But no, it gets paid. It gets paid by the people that provide you that account. And so what I would say on that is that it's really tempting to go to a system of a website, get a merchant account in 10 seconds that doesn't ask you any questions. That doesn't do any— do much due diligence. Maybe there's automation, but you want the guy that drives you nuts asking you for all these stupid links and these documents and then ask you a thousand questions to understand your business because he's actually helping you. He'll be able to defend you later. He'll make sure that you're— that you're being compliant. Because if you're not, you will be shut down almost definitely, or you'll have a lot of chargebacks. You'll have a lot of problems. And so once again, getting that good, really knowledgeable PSP, ISO, acquirer, it's a good thing. It might seem like a pain, but it's the right way to go. It'll save you in the long run for sure. And remember, definitely he's on— he's liable. That's why he's asking all those questions.

It's definitely a different process, you know, and I think people should, you know, not— because I always tell people, like, when they go to Stripe or one of these other similar companies to them, they're not reading the terms of service. They don't look at the restricted and prohibited list, and then all of a sudden they're like, oh, I'm shut off, my money's held, boom boom boom, why why why why why? And, and then they come to me, and then I have to go unravel the whole thing and go, okay, well, you did this wrong, this wrong, this wrong. They're like, well, why didn't they tell me that up front? Well, that's not—

you didn't ask.

That's not their business model, and you didn't ask. So, so if people want to get in touch with you, Scott, what's the best way for them to get in touch with Sure.

So you can go to frauddeflect.com or scott@frauddeflect.com for email. You can Google Scotty Adams. I'm all over the web, YouTube, etc. I'd love to hear from you or reach out to Allen. He can help too.

All right. So we'll post in the link show notes. We'll have some, some, some links in there, possible discount and Well, thank you for coming on the show today, Scott. It was enjoyable discussion. I hope everybody learned something. And if you have questions about merchant accounts, question about chargebacks or getting set up with fraud deflect, we can help you with that, myself or Scott. So thanks for listening to B2B Vault, the Biz to Biz podcast sponsored by NPS One. That's our new gateway helping you do payments smarter. And faster. Thank you very much, everybody. Peace out and carpe diem.