Chargebacks are created with the customer in mind, as a mean of protection against fraud or mistakes in the handling of a transaction. This is when your customer goes directly to the bank to ask for a refund instead of resolving the issue with you.
The real danger to the merchant’s business is when chargebacks pile up, and your merchant account becomes restricted or even taken away from you. That is just one of the reasons why chargeback protection for merchants must be one of your top concerns.
There are three common types of chargebacks:
- True fraud chargebacks (aka criminal fraud) – fraudulent or incorrect transactions that the customer did not make
- ‘Friendly fraud’ chargebacks (aka chargeback fraud) – made by the customer against legitimate charges
- Merchant error chargebacks – made by incorrectly processed orders
True fraud chargebacks
Merchant protection from true fraud chargebacks require authentications like Address Verification System (AVS) and Credit Verification Value (CVV), to safeguard transactions against stolen credit card numbers.
Also, try to monitor orders for discrepancies, like billing and shipping address mismatch, or someone trying to rush a big order through before you realize it was a fraud.
When your customer enters their billing address, is that address AVS verified to match the card they are using? Does your gateway have a required field for the CVV code on the back of the card? Are you validating the customer’s email address? All these data points can be verified automatically and seamlessly. If your gateway is not doing that, you’re needlessly inviting fraud and chargebacks into your network.
Friendly fraud chargebacks
Friendly fraud most often happens when a customer is not satisfied with a product or a service provided by the merchant and is either not patient enough or not really getting a desired outcome, so they make an end-run to their bank with the chargeback request. Or they simply want to steal the products they want and abuse the chargeback mechanism to do this.
Part of this problem can be tackled with good customer service. Be sure your product descriptions are accurate so that there are no misunderstandings that might lead to customers asking for a chargeback. If it comes to that, have a good, accessible refund policy. Make it easier for them to get a refund through you than a chargeback through their bank.
Be quick about processing orders and shipments, and if delays happen, keep your customers informed. Manage their expectations. Let them know how the charge will appear on their statements. This will help you with those “I do not recognize this transaction“ cases that almost always lead to chargebacks.
Another angle to attack this problem is good data capture on your transactions to support your representment in disputes. Specifically, your website should be configured to capture users’ IP address, geo-location and activity on site. Your payment gateway should then tie that information to a name, address, card number etc. And you should be keeping records of this information in a organized and accessible manner so that you can send it promptly in a representment. In this day and age there is no reason why you can’t do this instantly and efficiently.
Chargebacks caused by merchant errors
Merchant error chargebacks are very common, but fortunately, they are also some of the easiest to reduce. With every chargeback comes a reason code, and merchant error reason codes will tell you exactly what went wrong. Use these codes to isolate problems in your sales chain that are causing chargebacks. Perhaps a product description is unclear or misleading. You may be over-promising on lead times or delivery guarantees. Whatever the issue, use your previous merchant error chargebacks to your advantage.
Services that can help
You can always hire a third-party service company to handle the chargeback protection for you and your business. ChargebackHelp assists you by managing all of your disputes so you can focus on your core business.
We manage the alerts that let you know there is a pending dispute against you. This way, you can refund the customer and your business does not get a chargeback registered with the bank. This reduces your chargeback-to-sales ratio, keeping your head above the water and in the business.
We also fight on your behalf against friendly fraud to recover your revenue from legitimate transactions. We help you mobilize your transaction data for successful representments, which is also a great deterrent against future friendly fraud.
Staying afloat is not an easy task in today’s e-commerce market and chargebacks can really be a drag on your success. Investing in a good chargeback service is vital, and ChargebackHelp can give you a free analysis so you can start reducing your losses today, and giving your business an advantage that will sustain your revenue stream! Drop us a chat down on the right, shoot us an email, or go old-school and call us 1.800.975.9905