chargeback is a transaction in reverse. Rather than putting money into your account, it takes money out. You have to pay a fee for every chargeback, plus, if you get too many, your processing account could be closed. Most merchants rely on chargeback reason codes to determine the transaction dispute cause. With the rise of friendly fraud, however, reason codes aren’t as informative as merchants assume, and the truth is vastly different from what the reason code implies.
See underneath for explanations behind a chargeback:
- A cardholder makes a purchase, and at that point experiences “purchaser’s regret,” regretting the purchase yet not interested to confront the merchant.
- The customer claims that the transaction is unauthorized and records a chargeback.
- The bank issues a chargeback with a fraud-related reason code, and the merchant acknowledges this reasoning.
- The merchant takes the reason code at face value and wants to reinforce fraud prevention tactics, influencing the checkout process to be more troublesome for other clients.
- The chargeback itself was inconvenience enough, however, now things get worse. Not only are the extra fraud detection efforts unwarranted, but the added friction also causes the merchant to lose legitimate business.
- To top it all, because the transaction was authorized and friendly fraud was the real culprit, the merchant is doing nothing to determine the genuine issue … meaning the issue will continue happening.
For the merchant, there is lost income, lost merchandise, and irritated clients.
All efforts to reduce chargebacks will be unsuccessful unless merchants can determine the genuine reason for chargebacks. That is the reason IPAYTOTAL made BUILT-IN FRAUD PREVENTION, a restrictive procedure that enables us to examine a transaction dispute and determine the real reason behind the reason code.
When merchant have distinguished the genuine reason for a chargeback, they can actually start prevention practices to stop the revenue loss. Now, they are battling the issue itself, not only the indications.
The Cost of Chargebacks
- A chargeback can cost the dealer anything going from £20 to £100 per chargeback. These expenses are set up to take care of the expenses of the chargeback procedure.
- The expenses of processing the transaction, including the interchange fee, are squandered. On the off chance that the stock was delivered, the chargeback sum will likewise incorporate the delivery and be dealing with.
- The shipper likewise loses the cost of the products Merchandise related with a chargeback and it is infrequently come back to the dealer, so the vendor relinquishes the cash spent on the thing and any potential for future gainfulness.
- Chargebacks enable banks to persuasively expel stores from the vendor’s record. Unless the dealer’s re-presentment case is fruitful, that income is lost until the end of time.
- Vendors can question the chargeback, however, that is a costly, tedious, work serious process, squandering significantly a greater amount of the dealer’s assets.
- At long last, exorbitant chargebacks additionally increment the chances of an ended shipper account, prompting position on the MATCH list (also called the Terminated Merchant File). The consequence of this being the dealer be named as high-risk and consequently would require a high risk merchant account, with additional charges, conceivable moving stores, high setup expenses, and the sky is the limit from there.
The Most Important Step to Reduce Chargebacks
The first step in reducing chargebacks is determining the actual reason for chargebacks. Notwithstanding the various reason codes utilized via card networks to categorize a chargeback, there are really only three true sources:
Criminal Fraud: Also known as credit card fraud, this is where offenders access to credit card information and make unauthorized transactions. The greater part of all chargebacks are faulted for credit card fraud, yet under 10% of chargebacks are in reality because of criminal actions.INTEGRATED FRAUD PREVENTION helps in keeping your shoppers and blocking the fraudsters at the same time
Merchant Error: Faulty business practices, unchecked policies, processing errors—there are several merchant missteps that can cause chargebacks. To uncover potential chargeback triggers, merchants need a thorough, unbiased inspection of business policies and practices.
Friendly Fraud: Also known as chargeback fraud, this practice is sometimes because of the absence of comprehension with respect to the purchaser. Ordinarily, in any case, it is a type of “cyber-shoplifting.” Savvy customers distinguish and abuse provisos in the chargeback procedure to game the system and secure an undeserved, no-hassle refund.
The key is to keep a log of all transactions that come through to the business, record calls where conceivable, utilize misrepresentation anticipation instruments that are accessible through certain payment Gateway providers and remain in correspondence with the end shopper on the off chance that they have any worries in regards to the items that have been sent out. Along these lines, the dealer has a superior case for guarding chargebacks.
Reducing Chargebacks Can Lead to Fewer Headaches…and More Revenue
Too many merchants treat chargebacks as an inevitable cost of doing business.
The truth: chargebacks are largely preventable. With the appropriate precautions, it’s possible to reduce chargebacks by as much as 40%. Not only that, but most chargebacks that do get filed can be successfully disputed with the right strategy.
Best Methods to Reduce Chargebacks
There are ways merchants can help reduce chargebacks on their own. These efforts are nominally effective —the easy-to-prevent chargeback disputes that are rectifiable without professional assistance.
On the other hand there are various reasons that a transaction can be disputed and returned through the chargeback process, but most chargebacks occur as a result of fraud. So, if you can reduce fraudulent transactions,
you can reduce chargebacks. Here are some steps that may help you to reduce the number of chargebacks you receive:
- For non-pin-based transactions, look at the expiration date and signature panel. If there’s no signature, check the customer’s ID and ask the customer to sign the card. If the customer refuses, don’t accept the card. Always get authorization for every transaction by swiping the card or inserting the chip into the terminal.
Look at the hologram on the front or back of the card. It should reflect light and appear to move. Chip cards should always be dipped & not swiped. Complete settlements daily as delays can result in a payment dispute.
- Since the physical card and cardholder are not present at the point of sale for card-not-present transactions, you should ensure to gather and record as much information as possible from the cardholder before processing a transaction.
Always obtain an authorization. Ask the customer for the expiration date and include it in your request. If possible, verify the card code – that’s the 3-digit security code(CVV) located on the back of the card for Visa and MasterCard or the four-digit number on the front of an American Express card.
If you are still suspicious:
- Verify the cardholder’s address using an online maps website.
- Verify the cardholder’s phone number by calling it to see if it is connected. Fraudsters often use bogus telephone numbers; a delay in picking up the phone could mean fraudsters are overseas and redirecting calls via the internet.
- If you cannot verify the address or phone number, but believe the order is genuine, you can further request identification such as a photocopy of the front and back of the card and a driver’s licence. This ensures the person has the card in their possession. Be on the look-out for images that have been tampered with or that are not a genuine photocopy. Some merchants have reported receiving copies of fake cards; these are often in a JPEG format. Request signed confirmation when delivering products.
- Check the receipt
- Chargebacks can also be the result of double-charging, credit card expiration or customer disputes. To avoid double-charging, be sure to double-check (even triple-check) the amount you are charging, both on the terminal and on the receipt, and always check the expiration date on the receipt.
- Respond quickly to disputes
- Customers aren’t happy when they think they’re being ignored. If they ask for a refund, issue it as quickly as possible. If you don’t, they might think you’re not going to give them a refund and they might call their credit card company, and that can result in a chargeback.
- Be proactive with returns
- Try publishing your return policy. Put it on a sign near the register and include in on your sales receipts.
- And remember, if you use a third party processing company, that company’s name will appear on the customer’s statement(Descriptor), not yours, so let the customers know this to avoid confusion.
- For online transactions, your refund policy should be disclosed to customers before the transaction. Merchants should provide a valid “click to accept” disclosure and the policy placed on the same page is in a scroll down format to prove that customer was aware of policy at the time of the transaction.
- Be descriptive online
- Finally, if you sell items on the internet, describe the items in as much detail as possible. Pictures and measurements are helpful.
- As a general rule, keep as much information about your transaction and your customers as you can, including any emails or other correspondence.
- Chargebacks cost you time and they cost you money, and unfortunately, they’re an unavoidable part of doing business. But, if you’re vigilant against fraud, and communicate with your customers, you’ll see fewer of them and you’ll spend less time dealing with the hassles.
Contact Us Now
If you want to know more about chargebacks and ways to prevent them, contact us right now.
You can call us at +44 800 776 5988 or even mail us at firstname.lastname@example.org