How the Internet of Things is Causing More Chargebacks?

Jennifer Blake Posted on March 11, 2021

Do you know that every second, another 127 devices are connected to the internet? According to research, there will be 64 billion IoT devices worldwide by 2025. While these devices make our lives easier, they also significantly increase chargeback numbers and friendly fraud.

What is the Internet of Things?

The IoT is a network of internet-connected devices that can collect data and share it over wireless networks without the input of humans. These devices include automated vehicles with sensors, connected medical devices, solar panels, and biochip responders, and much more.

How could an IoT purchase cause chargeback disputes for merchants?

You are probably now wondering what IoT purchases are and how they might cause chargeback disputes for merchants. An excellent example of an IoT purchase is an internet-connected smart fridge automatically creating a transaction to order replacement food items. This type of transaction is known as a frictionless payment because there is no input from the owner.

A chargeback dispute and unintentional friendly fraud may occur if the cardholder doesn’t recognize the charge because they were not physically involved in creating the transaction. Alternatively, the cardholder may decide that they do not want the items ordered by the smart fridge. Rather than going through the hassle of returning the order or item, they dispute the charge with their payment provider to get a refund.

How do fraudsters abuse the Internet of Things?

One of the first examples of Internet of Things fraud occurred when banks introduced IoT-enabled ATMs. Fraudsters recognized an opportunity to use the ATMs to gain access to and change cardholder account balances. By using this entry point, fraudsters were able to manipulate the technology and steal cash from cardholders.

From this point on, fraudsters have looked for opportunities to steal sensitive data and access customer accounts via each new IoT device that gets added to a network. Complex passwords can do little to protect people if a vulnerability is identified in an IoT device and easy access to systems occur through devices such as appliances or even an interconnected doorbell.

How can Payment Help help you with the Internet of Things frauds?

The number of fraud threats is increasing every day. As a merchant, it is essential to be ready to protect themselves from these risks. At, we aim to make your business safe from these threats through our chargeback management software.