Stopping Chargeback Abuse: How Device Identification Protects Your Bottom Line

Every day, online merchants lose thousands of dollars to a growing challenge: chargeback abuse.

What started as consumer protection has become a favorite tactic for fraudsters. The numbers are stark: each chargeback costs merchants nearly $200 in combined expenses, according to a report from LexisNexis Risk Solutions. That adds up to billions in lost merchandise, wasted shipping, processing fees and operational efforts. 

And scammers aren’t just taking your revenue—they’re damaging your reputation and customer loyalty. When a valued customer’s account is compromised, they typically blame your business, not the fraudster. And that trust, once damaged, is exceptionally difficult to rebuild.

Meanwhile, you face a difficult balance—strengthen security and risk frustrating good consumers, or keep things frictionless and leave yourself vulnerable. Consider the guest checkout process. Remove account creation requirements and your conversion rates improve—but you’ve also created a greater opportunity for fraud. Bad actors can make purchases with minimal verification, then file illegitimate chargebacks claiming “items never arrived” or “I didn’t authorize that.”

Our company was at the annual MRC event in Las Vegas last month, where we met with merchants who overwhelmingly brought up a consistent theme: chargeback prevention and account takeover defense are top priorities. This is exactly where device ID emerges as a powerful tool.

Device Identification: Your Digital Security Layer

Device ID is essential against chargeback abuse. This capability, which gives each device that interacts with your platform a unique digital signature, enhances your defense in two important ways:

1. Prevention Before Problems Occur

Device ID spots warning signs during checkout:

• Devices linked to previous chargeback issues
• Unusual patterns like one device using multiple payment cards
• Location discrepancies—orders shipping to one location while the device connects from elsewhere
• Technical indicators like headless browsers suggesting automation

The advantage? You can increase verification only for suspicious transactions while legitimate customers enjoy a smooth checkout experience.

2. Evidence That Strengthens Dispute Resolution

Even with strong prevention, some chargebacks will still occur. When they do, device ID provides compelling evidence:

• A digital trail linking the disputed transaction to a specific device
• Records showing the same device completed previous legitimate purchases
• Technical evidence that meets card network requirements

This matters significantly with Compelling Evidence 3.0, which allows merchants to shift chargeback liability back to card issuers when you can demonstrate:

• The device fingerprint, IP address or delivery address matches previous undisputed transactions
• The same customer completed legitimate transactions within 120 days

This makes it much harder for someone to claim “I never received it” when the same device ordered (and kept) several previous deliveries to the same address.

Arkose Device ID: Advanced Digital Fingerprinting

At Arkose Labs, we’re pioneering device identification with Arkose Device ID—a sophisticated system that goes beyond the basic fingerprinting techniques that fraudsters have learned to bypass.

Our solution creates unique, persistent identifiers by analyzing hardware attributes, browser configurations and session telemetry to generate device identifiers that resist spoofing attempts. This allows you to track specific devices and connect their behavior to user signals like accounts, emails and payment methods.

What makes our solution different? We’ve designed a dual-layered approach that combines persistent tracking with real-time contextual intelligence. By integrating Arkose Device ID into your user systems, you can map fraud patterns across your platform—identifying connections between devices and accounts that would otherwise remain hidden.

This insight enables you to target suspicious behavior effectively. When you identify a previously flagged device or an account with an unusual number of devices, you can trigger additional authentication or pause potentially risky payments before they become chargebacks.

Your Chargeback Defense Strategy

When integrated into your fraud prevention architecture, Arkose Device ID functions as both a pre-transaction risk signal and post-dispute evidence system.

Pre-transaction risk assessment:

• Identifying guest checkouts from devices with suspicious telemetry
• Detecting session anomalies including multiple payment method utilization 
• Recognizing inconsistencies between IP intelligence data and shipping information

Post-transaction dispute management:

• Providing comprehensive device telemetry for dispute resolution
• Generating session correlation data to establish user behavior patterns
• Delivering the technical evidence parameters card networks require

We don’t just provide a device ID—we deliver the full context. For example, Arkose Device ID reveals suspicious activities like a single device accessing multiple accounts from unusual locations, even when fraudsters use VPNs and browser manipulation to hide their identity. That level of detail significantly improves your position when fighting fraudulent disputes.

The Future: Better Security, Better Experience

As fraud tactics evolve, traditional security approaches become less effective. The most successful merchants will combine strong device identification with real-time behavioral analysis and smart risk assessment.

Arkose Device ID provides a foundation for this defense, enabling you to:

• Detect subtle abuse patterns that might otherwise go unnoticed
• Apply friction selectively—maintaining a smooth experience for legitimate customers
• Build strong evidence for disputes
• Stay ahead of new tactics through our continuous updates

By implementing advanced device identification in your fraud strategy, you’re not just reducing chargeback losses—you’re creating a shopping experience that legitimate customers appreciate while deterring would-be fraudsters.

Ready to strengthen your chargeback defense? Let’s discuss how Arkose Device ID can help protect your business and your customers.

*** This is a Security Bloggers Network syndicated blog from Arkose Labs authored by Casey Joyce. Read the original post at: https://www.arkoselabs.com/blog/stopping-chargeback-abuse-how-device-identification-protects-your-bottom-line/