Chargebacks are a frustrating reality of doing business. They can damage your bottom line, expose you to potential fraud, and leave customers feeling taken advantage of if they lose the chargeback - all of which can erode your company image.
Fortunately, there are strategies you can use to minimize chargebacks and protect your business from fraud-related losses.
Understanding Chargebacks
A chargeback occurs when a customer disputes a transaction on their credit card statement, and the bank or payment processor refunds the customer’s money.
This situation can occur for a variety of reasons - some legitimate, like fraud or merchant error, but also some less than legitimate, such as friendly fraud or technical errors.
- Fraudulent chargebacks happen when a customer or an outside party uses stolen credit card information to make a purchase from your business.
- Friendly fraud occurs when a customer makes an authorized purchase and proceeds to dispute the charge with their bank to receive a refund, often without any legitimate reason.
- Technical errors can also result in chargebacks - for example, if a customer’s payment is not processed correctly or the merchant does not provide adequate proof of payment.
Business owners need to understand that excessive amounts of fraudulent chargebacks can significantly impact their bottom line and profitability. You lose more than the sale; you also have to pay a non-negotiable chargeback fee. And if too many chargebacks occur, merchants could risk termination from Visa or other payment networks.
Your customers are affected as well. Customers who experience chargebacks may be less likely to do business with your company in the future and may even spread negative word-of-mouth to their peers.
Identifying and Preventing Chargebacks
There are a few actions you can take to identify and prevent chargebacks.
First, cultivate an environment where discrepancies and mistakes get identified quickly. Doing this requires keeping accurate records and establishing an effective system for monitoring customer disputes. Your fast response can help resolve issues before they turn into chargebacks.
Next, provide clear refund and return policies that customers can easily access. It's critical to ensure customers understand the rules for returning or exchanging an item.
These steps help with chargeback prevention. If you want to reduce fraud specifically, focus on strengthening your security.
Security measures such as SSL certificates and PCI compliance should get implemented within minutes. Fraud detection and prevention tools such as Sonar, which can identify suspicious activity, provide even more thorough protection.
Fighting Chargebacks
If a chargeback does occur, don't panic. You may be able to fight the unjust charge and get your money back.
The most crucial step is to gather evidence and submit it to the issuing bank - usually within 14 days of notification of the chargeback. The evidence most likely to win a dispute includes transaction records, product descriptions or images, delivery confirmations, signed contracts, customer correspondence, IP addresses, and other records supporting your case.
Fit your evidence to match the charge. If a customer alleges fraud, use the transaction IP address to show that it matches the address linked to the customer's credit card. If there is a missed delivery, provide proof that the customer received the item.
You can mount a real defense and send a rebuttal letter to the bank when you have your evidence. To do this effectively, state the facts of the case and provide copies of all transactions. Make sure to emphasize customer satisfaction and how you tried to resolve the situation before it became a chargeback dispute.
Fighting your case takes time and effort. You can make it easier with tools like SeamlessPay's chargeback management.
Preventing Losses with SeamlessPay
SeamlessPay reduces the risk and cost of chargebacks. We offer merchants the ability to respond to chargebacks directly in our online portal, saving you serious time.
Additionally, Sonar from SeamlessPay provides businesses with an extra layer of security that can help prevent fraudulent transactions from ever hitting customer accounts.
The tool uses machine learning algorithms and big data analytics to detect suspicious behavior. It can match online shoppers with similar fraud patterns, analyze transaction history and geolocation data, and detect red flags indicating a fraudulent purchase.
The results are an improved user experience with heightened security, fewer chargebacks, and better cash flow.
Conclusion
Chargebacks will happen. And when they do, your business will lose money if you don’t prepare a strong rebuttal. SeamlessPay can help.
SeamlessPay can reduce fraudulent activity through its security measures like Sonar and offer merchants the ability to respond to chargebacks quickly and effectively in our online portal.
Save time and money while preventing chargebacks with SeamlessPay. Contact us today!
