June 7, 2018
What Is A Credit Card Chargeback
A credit card chargeback was traditionally designed to protect the consumer from fraudulent activities or from misleading customers with false promises or substandard products. This has become especially pertinent in a time when most purchases are being made online.
From an ecommerce business perspective, a credit card chargeback has the potential to damage not only your reputation as a business, but also have a negative effect on your ability to have a merchant account.
In the case that a chargeback is made against your business, and you believe it to be an error, you will have to formally submit a dispute letter containing evidence to back your innocence in the matter. A few examples of evidence to help your case may consist of a sales receipt, proof item was delivered to the correct location and in the condition stated, or simply a history of previously undisputed orders completed to the customer’s satisfaction.
Although there is no guaranteed way to disputing a chargeback, these are some of the factors that would help you accomplish your goal. In terms of customer disputes, it could come down to them simply stating the charge is fraudulent and they did not make it. In more complex situations, they could claim the product is not as advertised, in which case, they will likely have to furnish proof.
Steps To Reduce The Possibility of Chargebacks
The importance of taking steps to reduce customer disputes and chargebacks cannot be overstated. The impact of having multiple chargebacks and disputes against your merchant account can have a crippling effect on not only your business and its ability to operate efficiently, but also negatively affect your credit score. This will restrict available options in the future and any potential of credit increases and growth.
Starting with a strong business model is one step that can be taken to aid in reducing the possibility of a chargeback. An efficient and streamlined model will ensure your procedures and processes do not have delays or inadequate failsafe measures in place to deal with them. One example of this may be having a specific turnover time for processing returns or cancellations. This will ensure that no charges are made in error or a customer dispute initiated. An ideal failsafe measure may be something as simple as communicating with the customer as the process is occurring. Confirmation emails throughout the processing stages can make all the difference. Be aware! Having strong procedures in place is only half the battle. Proper execution is a must.
Execution of Business Model
With poor execution, the best of procedures will mean nothing. Ensuring procedures are followed in a timely manner are paramount in accomplishing the goals of your business model. This includes accurately and securely processing information and not misinforming customer with false quality standards, deadlines or product information and upholding the highest standards of customer service overall.
Clearly Stated Policies
Having policies clearly stated during the purchasing process is a sure way to avoid future disputes, as well as giving you a leg to stand on in the event a dispute or chargeback does occur. More specifically in terms of order cancellations and returns, having clearly stated and easy to understand rules for how an order can be cancelled or returned ensure the customer is informed and you are ultimately protected.
Support services like analytics and process monitoring can ensure that when the time comes that a dispute or chargeback occurs, you have all the necessary data to deal with it properly. Having the information from transactions will give you the ability to combat errors from an evidence based perspective. This might include thetransaction history of the customer and card and location data of the purchase to combat customer fraud.
What is Chargeback Mitigation
Chargeback mitigation is the process in which a business takes steps to combat illegitimate chargebacks. There are many things that can lead to a chargeback mitigation being a necessary step for the business. These issues include criminal fraud, “friendly” chargebacks and merchant errors.
Criminal fraud is purposefully committing a fraudulent act while “friendly” chargebacks are so called because they typically occur because of an honest mistake being made. This does not in any way lessen the severity of the impact multiple “friendly” chargebacks could have. Merchant error typically occurs because of some sort of oversight or error internally. Mitigation may be the only way to fix the business’ reputation because of the position the chargebacks have put it in. Some of the tools a mitigation strategy could consist of are:
• Anti-fraud technology
• Chargeback alerts
• Fraud filters to analyze transactions
• Implementing preventative tactics (confirmation, identity/location verification, etc)
A strong mitigation strategy can be what ultimately pulls your business back from the brink of collapse. High numbers of disputes and chargebacks will bring with it the likelihood of losing the ability to process credit card transactions. Winning chargeback reversals are the ultimate goal of implementing these strategies, ideally defending you from unjust disputes and chargebacks while helping the image of your business remain untarnished and ensuring you do not lose any of the profits that are owed to you.
What Are Chargeback Alerts
A chargeback alert is designed to inform you immediately of a chargeback before the issue gets out of hand. Traditionally, you would be informed by the credit card company of a dispute and you would not have an appropriate amount of time to react to the issue.
An alert gives you the option to properly deal with the issue before it reaches the credit card company and impacts your merchant account negatively. Receiving the alert helps you avoid fees and negative marks against your account that would otherwise impact your business.
Unfortunately, alerts are not a guaranteed measure for avoiding issues related to chargebacks. Not all banks and institutions participate in alerts, leaving a gap in potential alerts. The benefits far outweigh the costs in terms of protection, even with the gap of service. The aftereffect of a chargeback or dispute has the potential to far exceed the cost of whatever was being purchased or of the service being provided. This service will add a layer of protection that will supplement the other steps you have taken to avoid chargebacks and disputes.
Think of each precaution as a safety net. None will give one hundred percent results standing alone, but working together, they have a higher likelihood of preventing disputes.
Better understanding credit card chargebacks will prove to be the best way to avoid them. Understanding the signs and having measures in place to confront them is a necessary part of your business model and strategy moving forward. Taking the steps listed above and implementing additional techniques tailored to your specific industry will help in dealing with chargebacks and disputes when they arise.
Unfortunately, it is unlikely that chargebacks and disputes will ever be a non-factor in the commerce space. Although, dealing with them will remain an imperative part of day-to-day business for the foreseeable future, growth in technology and refined practices are progressing every day. This progress in the tech and business practice space is the light at the end of the tunnel. Focusing on reducing chargebacks in your business, should be practiced on a daily basis to ensure customer satisfaction and your company’s reputation.
Mark Sands is founder of HRMA-LLC, a leader in the payment processing space. We have distinguished ourselves as an industry leader, providing unsurpassed customer satisfaction. Our experienced team has decades of experience, combined with a passion for providing the highest level of customer satisfaction, unparalleled within our industry. Visit us today at https://hrma-llc.com