Episode Description

Fraud and abuse are quietly eating into your margins and most founders don't realize how bad it is until it costs them tens of $.

In this episode, you'll learn:

• Where D2C brands actually lose money
• How to control promo and loyalty abuse without alienating good customers
• Returns prevention, detection, and recovery tactics (before and after the sale)
• Payment fraud baselines (AVS, CVV, 3DS, CE3.0, and risk tiers)
• A 30/60/90-day action plan
• KPIs and dashboards to prove it's working

By the end, you'll know exactly where to start, what to measure, and how to protect your margin while keeping great customers happy.

Key Topics

• Fraud costs $13.70/$100 returns, $3.75/$1 fraud.
• Types: promo abuse (leaks, stacking),
• loyalty fraud (ATO, points farming),
• returns abuse (wardrobing, empty-box),
• payment fraud (card testing, friendly fraud).
• Risk tiers: VIP (frictionless), medium (light step-up), high (3DS).
• Chargeback defense: reason codes, CE3.0, dispute win rates.
• 30/60/90-day implementation.

Sources Mentioned

• National Retail Federation + Appriss Retail, "Consumer Returns in the Retail Industry" (2023): Return rate ~14.5%; $13.70 fraud loss per $100 of returns
• LexisNexis Risk Solutions. Each $1 of fraud costs retail/ecom ~$3.75 all-in
• Visa/Mastercard chargeback monitoring programs.
• PSD2 and 3-D Secure 2 guidance.

Key Definitions (For Listener Reference + Adjacent Terms to Know)

• ATO (Account Takeover): Fraudster gains control of a customer account
• AVS (Address Verification Service): Checks if billing address matches card issuer records
• BIN/IIN: First 6-8 digits of a card number that identify the issuer
• BNPL (Buy Now, Pay Later): Financing services like Affirm, Klarna, Afterpay
• CE3.0 (Compelling Evidence 3.0): Visa program to dispute friendly fraud with proof of legitimate transactions
• CVV (Card Verification Value): 3-4 digit security code on card
• OTP (One-Time Password): Temporary code sent via email/SMS for verification
• PSD2 (Payment Services Directive 2): EU regulation requiring Strong Customer Authentication

Connect with Leo:

• X: ⁠Leo Sadeq⁠
• LinkedIn: ⁠Leo Sadeq⁠
• Want to 2X-5X your ROI in 90 days? Let us help you >>> ⁠Ascend AI⁠
• DM me for any resources or checklists mentioned in the episode and Ill forward them your way.

Until next time :)