BluePay is pleased to bring you this valuable information from our partner, Due, makers of a free digital wallet that allows users to easily make and accept payments online.
With more business being conducted online, the risk for fraud goes up. That’s because fraudsters see the opportunities to try and get something for nothing, and many have found a way to do that thanks to something known as chargebacks.
Now, chargebacks can also be entirely legitimate. They occur when a credit or debit cardholder calls their bank or whoever issued their card to report a questionable charge on their account. Either they don’t remember it or know for sure they never authorized it. It may also be that they did order something but never received the merchandise (or claim they didn’t).
At that point, the bank or card issuer will provide a credit on the account so the customer is not liable for this amount while they investigate this claim. Meanwhile, as a business owner, you will have extra fees and potentially lose the revenue from the sale. Often, (really often), the bank rules in favor of the customer, which is why so many fraudsters have caught onto chargebacks as a great scheme to get free merchandise.
Chargebacks happen to all types of online businesses but more so for industries and segments known as high risk, including travel agencies, online pharmacies, gaming sites, auctions, and international commerce stores. It may also be because your payment processing history shows a higher number of chargebacks and refunds or you rely on no signature payment methods.
Other signs that you may be considered a high-risk processing business is you are new with little to no processing history; you do recurring payments; you process in multiple currencies; you have seasonal or sporadic sales; you have large average transaction amounts; and/or you have a bad credit history.
In order to combat the fact that you may be vulnerable to a greater number of chargebacks, you can enact these strategies:
- Include contact information on all credit card statement transactions, including an email address and phone number as well as merchant name. This helps the cardholder remember what it was that they purchased and have a way to reach out to you. Additionally, this helps improve your credibility in the mind of the card issuer who sees you as a legitimate company and can also easily reach out to you.
- Respond quickly to any customers that contact you about a problem they have receiving merchandise. This helps ease their mind and illustrates that you are a professional.
- Offer a way to resolve any disputes before it escalates to the point of including the cardholder’s bank or issuing company. Find out how you can take care of the matter so as to avoid a chargeback.
- Clearly post your return and refund policies on your website where it can be found. You can also include it in the invoice or receipt that gets sent to their email. This also helps cover you should the card issuer get involved.
- Give customers online tracking and realistic delivery dates so they don’t start to worry and prematurely dispute the charge or file a chargeback. The online tracking helps them confirm their products are on the way.
- Alert customers to any incidents where you are out of stock on an item they ordered. Also, consider not charging the customer until their orders actually ship. Both these actions can reduce any attempt at a chargeback.
- When customers try to claim a chargeback, stating the item is not as described to potentially get the merchandise for free, be sure to combat this with plenty of pictures from various angles as well as numerous details about the products. Consider also disclosing anything that might be related to defects or other issues.
- Be aware of your customers, get to know who they are, and use available technology to track certain purchase behaviors to ensure that it is a legitimate purchase to begin with, including the use of an address verification service (AVS), two-step authentication, CCV as part of the payment information, IP verification, and even biometric tools, if necessary.
- Partner with a credit card processing company that can provide you with a merchant account and the tools to combat chargebacks. Working as partners is a much better approach than getting into conflict over any potential chargebacks. Together, you can fight any potential fraudsters.
The more proactive steps you can take to stop chargebacks, the fewer you will experience, helping you to minimize being known as a high-risk business in the eyes of the top payments companies. Plus, you will enhance your reputation as a credible online business and incrementally drive greater profitability.
If you want to learn more about high-risk businesses, or if your business is one, contact BluePay today to learn if BluePay is the right solution for you.