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What are chargebacks? 10 Tips to Protect Your Business from credit Card Chargebacks

Availing any product or service has become easier than ever before. People are living in a world where they can order any product just by clicking a single button on their smartphone. All of this is because of the rise of the e-commerce industry. Within the last decade it has grown at an unimaginable rate and now more people are willing to buy products online rather than going to a shop. This is because e-commerce websites provide a wide range of options compared to a local store that has limited options. You can easily browse through the products based on your requirements. 

Merchants who have e-commerce websites have benefited a lot from this shift. They have opened merchant accounts to make their services more accessible to the customers. By opening a merchant account the online businesses started accepting payments through credit cards and debit cards. This has helped them in many ways such as expanding their businesses. They have reached a wider audience and started shipping their products around the world. It has helped them in managing their money efficiently.

However, the adaptation of new technology gives rise to a new set of problems. In this case merchants are the ones who are affected by these problems. This is because when selling products online the merchant has to take full responsibility for delivering the products safely. If they fail to do so the customers may request chargebacks. Chargebacks are when a customer requests a reversal of credit card payment because of unsatisfied product delivery or services. This results in a loss for merchants because the customer requests the card issuer to carry out the process and not the merchant to get their money. When the card issuer carries out the process a nonrefundable amount is also deducted from the merchant account. Due to this the merchant not only loses the order but also an extra amount from his account. 

There are several types of charge frauds. True fraud is when a customer is charged improperly which is not the customer’s fault. Friendly fraud is when a customer is trying to take advantage of a company’s return policy. Merchants lose nearly 118 billion dollars every year due to chargebacks and this number is only increasing every year. A merchant can lose a significant amount of his profits due to the deduction of nonrefundable fees from their accounts during chargebacks. So it is very important for everyone involved in e-commerce to know how to protect against chargebacks.

Here are 10 tips to prevent chargebacks

Be proactive in solving the issues of your customers

Providing great customer service is proven to be one of the most effective ways to prevent chargebacks. This is because many chargebacks are requested due to a slight misunderstanding about the product. A study shows that nearly 49% of chargebacks are requested because of misunderstanding and sometimes the customers did not even know that they were filing for a charge. This is a loss for both merchants and customers. So always be available for your customers to solve any problem or doubt they have regarding the product. This highly reduces the chances of chargebacks.

Make sure the payment descriptors are clear

The payment related details should always be printed clearly so that there is no confusion. The details listed in the bill should inform the customers what they are buying, what is the amount they are paying for it, and from whom they are buying it. If these are not listed properly the customer may think he is getting a product he did not order and cancel the order. Oftentimes some e-commerce websites provide the details of the parent company of a product rather than listing the brand name itself. This will often result in customers requesting a chargeback as they believe they are not getting the product they have ordered.

Train your employees to avoid chargebacks

This is a simple but effective way to prevent chargebacks. When you train your employees in detecting signs of a chargeback it will be easier to fight them. Train them to look out for payment methods that are suspicious. Ask them to make sure all the details provided about the customer’s credit card are valid. Tell them to check that a customer is not using an expired credit card. This way you can prevent many frauds.

Be mentally prepared for chargebacks

Chargebacks are inevitable. No matter what kind of e-commerce business you have, you will always be getting chargebacks. There is no e-commerce business that did not get any chargebacks. So rather than panicking, learn to be prepared for them. When you are mentally prepared for chargebacks it will be easier for you to fight them. You will have a better strategy for preventing true frauds and friendly frauds.

Always lookout for warning signs

Learn to spot warning signs before the customer completes the payment. Make sure you use a chargeback protocol to detect a customer who may file for a chargeback. The protocol will inform you if there is any suspicious behavior or details. It usually informs if the customer’s bill and shipping address do not match or if the security code is incorrect. You can confirm the order by sending them an email or making them a phone call. This will prevent any true fraud.

Keep every customer’s payment record

Recording every detail of each customer may seem like an unnecessary process. But this is very effective in fighting against it. Usually customers file for chargebacks sighting that they did not receive the ordered product or saying they were charged more than what was mentioned. When such things happen you can simply show their payment records as evidence to dismiss their claims. It will also allow you to detect customers who file for chargebacks repeatedly.

Take every chargeback seriously and respond to them immediately

Don’t take the chargebacks lightly as they are very dangerous for your business. They are not the cause of loss in your business but also give it a bad reputation. So no chargeback should be ignored. As soon as you see a chargeback alert find out what is the reason behind it. If the reason is legitimate then it is fine but if the reason is not then prepare to fight back the claims. Merchants have a very short period of time to respond to chargebacks if they do not respond within that time they lose their money. So make sure to fight chargebacks that you can easily win.

Have a clear returning policy

If you have a return policy that clearly mentions the conditions of returning you can avoid plenty of chargebacks. The customer has to have legitimate reasons that satisfy the conditions to request a chargeback. If a customer requests for a chargeback without reading the returning policy you can simply show them the condition which makes their claim invalid. Even the card processor will check if the chargeback claim is valid based on the return policy saving you the inconvenience.

Use methods that prevent chargebacks 

There are many simple but effective methods that can be implemented by e-commerce businesses regardless of their scale to prevent chargebacks. True frauds can be prevented by just implementing basic security measures. Make use of credit verification value (CVV) or address verification service (AVS) to ensure that the customer is legitimate. Detect red flags like mismatched addresses. Contact the customers to verify if the order is legitimate and they want to continue with the purchase.

Take professional help if nothing works

If you are getting chargebacks even after taking all the necessary steps to prevent them from occurring then it is time to get professional help. But you must know if you really want the services of professionals. Because the expertise of these professionals is not cheap by any means. You should only call them when your business is really getting affected by chargebacks. See if you are incurring losses greater than the fee charged by the professional. But availing their services may help you deal with these problems permanently. 

Conclusion

The growth of e-commerce businesses has helped merchants in many ways. But chargebacks have been one of the major concerns of these businesses. Ecommerce businesses lose billions of dollars every because of chargebacks. Studies show that friendly frauds increase by 41% every two years. So this makes it very important for merchants to concentrate on chargeback claims. Provide better customer service and have a clear return policy that customers can understand. Make sure the payment descriptors are clear and do not have any wrong information. Train your employees to spot red flags and maintain payment records of every customer. Make use of methods that protect you from frauds to prevent chargebacks.

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