The holidays fast approach and across the country many retailers are getting prepped for the busiest shopping season of the year. For many retailers, the holidays can make or break the year. While many businesses will enjoy success over the holidays, the risk of chargebacks and fraud shouldn’t be overlooked. Unfortunately, chargebacks often spike around the holidays. Black Friday and Cyber Monday, in particular, drum up sales, but unfortunately, these shopping holidays can fuel chargebacks as well.
The National Retail Foundation (NFR) is projecting a strong holiday season, with sales expanding by a healthy 3.5% compared to a year prior. A strong economy and historically low unemployment should help bolster spending, but many people are also feeling the pinch caused by relatively high inflation. With many households facing constrained budgets, the risk of returns, fraud, and chargebacks may be heightened this year. Fortunately, there are a variety of measures retailers can take to mitigate risks.
Offer a Simple Return Process
Gifts will be returned. Some people may get double gifts. Some may simply not like a particular gift. Whatever the case, merchants should expect returns. It might be tempting to refuse returns or to make it difficult or expensive to make returns, but in practice, this can drive chargebacks.
If you won’t accept a return, the customer’s card issuing bank may be willing to step in and provide a de facto return by approving a chargeback. When this happens, the customer may not even have to return the product, meaning you’ll lose not just revenue from the sale, but also inventory. In these situations, processing a return is far better than dealing with a chargeback.
Provide Clarity With Billing Descriptors
Billing descriptors are the details that customers will find when looking through their credit card statements. Unfortunately, some small businesses make the mistake of using vague descriptors. You might run an online clothing store, say “Acme Amazing Sweaters” but then bill customers from say “Smith Acme Holdings.” A customer who bought a sweater on Black Friday likely won’t recognize the latter and when they see the charges they might think they were defrauded.
Especially with the holidays now in swing, customers are going to be making a lot of purchases, often from many different retailers. This could make them more likely to forget a particular purchase, and being short on time, a cardholder might not investigate a purchase but instead turn to their bank right away to file a holiday season chargeback.
Thankfully, the solution is rather simple: provide clarity with the billing descriptors. Also, if you set up chargeback alert services and data sharing services that card issuing banks can use to access information, such as Ethoca Consumer Clarity, you may be able to prevent chargebacks even if a customer is confused.
Set the Right Expectations With Accurate Product Descriptors
It’s also crucial to provide clear and truthful product descriptions. If you oversell your products with amazing but inaccurate product descriptions, you’re more likely to end up with unhappy customers. With gifts, the person making a purchase often won’t be using the product. Still, if the person who receives the gift is left underwhelmed, it could result in a costly holiday chargeback.
Watch For Fraud Red Flags
Chargeback fraud is always a threat for merchants, but the holidays often result in an extra dose of fraud. Unfortunately, this means you could end up dealing with an extra helping of chargebacks. It’s smart to watch for red flags, such as customers shipping to addresses that don’t match their credit or debit card. It’s also wise to watch for strange IP addresses and to pause suspicious orders until you can ensure they are legitimate.
If you’re shipping expensive goods, it’s smart to require signatures upon receipt. First, some customers may try to claim they didn’t receive a product that did, in fact, get delivered. Second, so-called “porch pirates” will have their eyes out for shipments left on porches. This is especially true following Black Friday and Cyber Monday as thieves know customers will be putting in lots of orders.
Another thing to watch for, especially around Cyber Monday and Black Friday, is overnight shipping. Fraudsters using stolen credit cards like to use this option because they can get the goods before the cardholder realizes their card or data has been compromised. Meanwhile, folks shopping for Christmas gifts in November have little reason to pay extra for expedited shipping.
Use Dispute Management and Fraud Detection Solutions
There are a variety of tools you can use to monitor for fraud, manage disputes, and otherwise reduce the risk of getting hit with chargebacks. Some key solutions to consider:
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Address Verification Services- These are used to check if the address an order is being delivered to matches what’s on file with the credit card.
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Captcha- Common software that deters bots, which can be used to brute force hack into a cardholder’s account with a merchant, among other things, to make unauthorized purchases.
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Chargeback Alerts- Provide merchants with a chance to resolve a dispute before a chargeback is filed.
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Dispute management platforms- You can fight chargebacks through the representment process, but keeping track of everything can be difficult. The right dispute management software makes it easy to track disputes, gather evidence, and submit documentation.
ChargebackHelp makes it easier to spot fraud by helping you monitor red flags and gather evidence. We can also help you gather evidence when representment becomes necessary, and we can help you manage holiday chargeback disputes. Further, there are several chargeback alert services available. It’s often wise to sign up for a few services, especially ahead of the holidays, but managing disparate solutions can be tricky. We make it easy by integrating multiple chargeback alert solutions on one platform.
Fraud will always be a risk for merchants, especially around the holidays. However, with the right solutions and effort, merchants can ward off fraud, reduce chargebacks, and when necessary, win disputes. With Cyber Monday and Black Friday fast approaching, it’s crucial to make sure you’re ready for both the holiday season and the chargeback/return season that follows after.