Chargebacks have become a major problem for businesses in the last five years. These forced payment reversals were originally meant as a consumer protection mechanism, but now they’re costing eCommerce retailers billions of dollars every year.

There are numerous triggers for the increase in chargeback volume; for example, the EMV liability shift in the U.S. drove more fraudsters to start exploring online fraud than ever before.

However, one problem — known as “cyber shoplifting”— stands out among all other chargeback triggers.

When you think of shoplifting, you probably envision someone with a quick hand shoving goods into a bag at the grocery store when no one’s looking. However, just like all other aspects of commerce, shoplifting evolved to adapt to the digital economy, and criminals have twisted the chargeback process to their benefit.

How does cyber-shoplifting work? And if it’s such a problem, how to fraudsters get away with it so easily?

Cyber-Shoplifting: Explained

Cyber-shoplifting describes a specific type of fraud in which a customer sets out with the intent to steal from merchants.

It’s a deceptively easy practice to pull-off; fraudsters operate by making a purchase, just like any legitimate customer. But once the goods arrive, the individual contacts her issuing bank and makes a bogus claim, such as that the item never came, it was defective, or what arrived didn’t match the seller’s description. The bank then initiates a chargeback on their customer’s behalf.

If the chargeback stands, then the buyer gets the money back and keeps the merchandise, while the seller loses sales revenue and inventory, and faces additional chargeback fees. This has long-term consequences, too, as each dispute impacts a merchant’s chargeback-to-transaction ratio. If this figure gets too high according to industry standards (around 1% of transactions), the merchant can lose the ability to process credit and debit cards, jeopardizing the entire business.

Some people use cyber-shoplifting to acquire merchandise they may resell; this is essentially the next step in the evolution of organized retail crime. However, it’s not uncommon for ordinary individuals to pull-off these attacks as a way of simply getting something for free. And unfortunately, a successful attack tends to encourage future bad behavior, as about 40% of consumers who file a chargeback will file another one within 60 days.

We’re Giving Crooks the Benefit of the Doubt

Both the customer and the merchant have a share of responsibility in a transaction, which means they should each get the benefit of the doubt. As it stands, though, the burden for our cyber-shoplifting problem falls solely on merchants, while consumers get a free pass.

If a cardholder is a legitimate fraud victim, then the last thing you want to do is accuse that person of being a liar when she demands a chargeback. No one wants to be overly-stringent with customer disputes for fear of driving shoppers away or developing a negative reputation in the market. However, this same attitude also allows cyber-shoplifting to thrive.

If merchants can’t distinguish between a fraudster and a legitimate customer, then any reduction in their chargeback rate will be hard to manage. Of course, trying to separate the two is very difficult just by cyber-shoplifting’s nature, so it’s much easier said than done.

The solution isn’t to assume that all chargebacks are cyber-shoplifting, nor is it to simply accept every chargeback. Instead, merchants need to develop the skills to distinguish between the two and deploy the proper response when necessary.

Why Do Cyber-Shoplifters Get So Much Slack?

If a merchant suspects cyber-shoplifting, then she should absolutely dispute the tranasction through chargeback representment. If it’s some other cause though, like a genuine error on the merchant’s part, then it’s best to own that mistake and accept responsibility for the dispute. That presents a problem: if cyber-shoplifters operate by impersonating legitimate customers, then how can you be sure who is who?

Trying to separate legitimate and fraudulent disputes by their source is a risky venture. The only way to really address the problem is with technology designed to identify chargeback sources beyond what’s reported in the dispute.

At Chargebacks911® for example, we use our Intelligent Source Detection tool, which combines machine learning and human expertise to identify chargeback triggers. Once we get to the root of the problem, we can deploy the right strategy to handle each dispute on a case-by-case basis.

Like I said: identifying and fighting back against cyber-shoplifting isn’t easy, and it’s practically impossible without the technology required to diagnose dispute triggers. However, given that chargebacks alone will cost merchants nearly $30 billion a year by 2020—not even factoring in the amount lost by banks and other parties—there’s not much choice in the matter. The options are to either get proactive, or be left behind.

Monica Eaton-Cardone is an entrepreneur and business leader with expertise in technology, e-Commerce, risk relativity and payment-processing solutions. She is COO of Chargebacks911 and CIO of its parent company Global Risk Technologies.