If you're in the position of a merchant, fighting a chargeback dispute might seem like a lost cause. Devoting your time and energy to something that is not likely to yield results is an ungrateful task. We get it. It's frustrating. However, there are ways to come out victorious. In this article, we bring the most common mistakes merchants need to avoid when tackling chargebacks.
Selling online means that a part of your business will also be chargeback disputes. Chargebacks are a way of customer protection that guarantees a return of funds in particular scenarios. Common reasons for incoming chargeback disputes include fraudulent transactions, item not received, processing issues, etc. Resolving a chargeback dispute can be quite daunting for the merchant since it involves various parties. Participants involved in a single chargeback include the cardholder, card scheme, issuing bank, merchant, acquiring bank, and a payment gateway. You can see how things are likely to become tricky at some point.
Although chargebacks traditionally favor the cardholder, since banks want to protect their clients, not all is lost. There are particular cases, which need to be carefully detected, that are worth fighting for. The chances are, you are not going to win each and every time, but orders for which you have strong proof of the cardholder placing an order and receiving the item/service are a good reason to start fighting. Let's review the most common merchant mistakes when it comes to tackling chargebacks.
Attempting to overturn every chargeback dispute would be naive and a waste of your time. On the other hand, missing out on the opportunity to keep your funds based on strong evidence where there is no merchant error will cause serious losses. According to Chargeback Gurus, Issuing banks report that 17% of chargebacks are actually friendly fraud, while merchants state that the number is closer to 32%. That's a pretty good reason to start fighting back. Set up clear rules based on which you will be able to identify which chargeback disputes are worth fighting for. Prepare all necessary evidence starting with the customer placing and receiving an order. Arm yourself with details that prove no merchant error was involved, and you can approach the dispute with high hopes of coming out victorious.
Make sure your team is up-to-date with the latest reason codes for chargebacks. Every chargeback comes with a reason code. A reason code tells you what type of chargeback you're dealing with, why did the cardholder file a chargeback, and lists necessary evidence needed to overturn the chargeback. Card schemes publish their resolution protocols along with reason codes in order to enable merchants to better understand the issue(s) that occurred and how to act accordingly in the upcoming dispute process. A comprehensive guide on reason codes by Chargeback Gurus gives an updated overview of reason codes by the card scheme.
Your goals are ultimately the same, so why not join forces with your card processor? They have far more experience dealing with chargebacks and provide more insight into how to approach a certain case. Card processors have the necessary knowledge to overturn a chargeback, as well as important information about resources and tools used for fighting them.
Chargeback rates higher than 1% indicate fraudulent activities happening on your site, e.g., ATO Fraud. This is followed by issuing banks flagging you as a high-risk merchant. Another important metric that gives you information about the next steps is your win/loss rate. A low rate suggests that you are ineffective in fighting chargebacks and should consider changes in your approach, whether it be resources or the team in charge.
Customers file chargebacks for a number of reasons. There are scenarios where the main cause of a chargeback is simply confusion caused by poor communication. To reduce the number of chargebacks, make sure that the customer recognizes the transaction in their statement, is not mislead by the product description, and understands the process following a placed order. By doing so, you are decreasing the chances of a chargeback dispute and having more time to focus on your core business.
Make sure you have a database containing all the steps of an order, from order placement to a signed slip after delivery. Having all the evidence organized in one place makes it easier for you and your team to prove that everything is ''by the book'' on your end. This enables you to act promptly in case of a chargeback and showcase all of the details necessary to avoid a chargeback.
Invest time in developing a chargeback flow. Clearly state all of the steps needed for approaching a case, from detecting a possible chargeback win to actually overturning a chargeback dispute. You are empowering your team with a systematic approach in order to be more efficient and keep them on track.
Investing in a fraud prevention solution enables you to devote your time to your core business, relieves your chargeback team from manual analysis, and, most importantly, protects your business and your customers. After all, prevention is the best cure. Take your time to research a solution that is best suited for your business. Stop chargebacks before they even happen.
There is no doubt that disputing a chargeback is a complex, time-consuming process that might not end up as a success. However, if you decide not to fight at all, your revenue, as well as reputation, might suffer. Before giving up, take the time to develop a chargeback flow and avoid the above-mentioned practices. Make sure that you communicate with your customers through every stage of the order and gather compelling evidence. React promptly. The results might be very rewarding.