Chargebacks are an unfortunate reality of accepting credit card payments, but they aren’t something businesses have to lie down and accept without a fight. Some chargebacks are completely legitimate, like cases where a purchase was made fraudulently by a third party. But many chargebacks are fraudulent, frivolous, or abuses of the system. In those cases, there is no reason for a company to accept losing the revenue, the product, and the additional chargeback penalty, and fighting back is in order.
There are only so many parts of running a business that you can prepare for. Like many aspects of life, it’s difficult to truly understand what it takes to be a successful business owner until you’re in the thick of it.
For example, one thing that no one tells you about starting a business is just how problematic chargebacks can be to an owner’s bottom line. Individually, these fees may not add up to much, but when underestimated and mismanaged, they can end up costing you big time.
When searching for the right payment processing solutions for your business, consider the importance of chargeback defense.
Over the past decade, the world of e-commerce has completely transformed consumer purchasing behaviors. Practically everything you once had to procure in-person can now be purchased from the convenience of your couch through a series of clicks, taps, and confirmation emails.
In fact, 1.79 billion people worldwide made a purchase online in 2018, with that number expected to grow to 2.14 billion by 2021. The moral of the story: your customers are shopping online with money that’s burning a hole in their pocket.
Whenever a credit card user disputes a charge they find in their credit card history, one of the provider’s first steps is to demand that the retailer returns the value of the charge. They protect consumers from fraudulent charges, but they can also be extremely costly to the merchant.
How can chargebacks hurt your business?
Even when the chargebacks are limited purely to potential credit card fraud, they can hurt your company’s bottom line. The revenue from a sale goes back to the consumer, and each chargeback usually has an associated fee. Having too many chargebacks can get your merchant account frozen, your company blacklisted, and your company fined.
Less straightforward incidents of chargebacks, like friendly fraud, can be even more damaging to your revenue and your company’s reputation.
What tools do you need to reduce the damage of chargebacks?
Get instant alerts so you can respond.
Chargeback alerts often come in the mail. Delays are bad for business. Text messages give you more opportunity to straighten out the dispute. Text messages can also be integrated with other automatic process tools so the alert becomes a case in the appropriate employee’s workflow.
Export your records to Excel.
It’s not just individual accounts of chargebacks that need your attention. Keep a living history of all the chargebacks issued to your company. Even if you don’t use the document to maintain a status report, you can use the report to know when your company is in danger of triggering fines, an audit, or the termination language with your payment processor.
Respond through an online interface.
Responding through faxes and letters is cumbersome. It also increases the risk of delays and the chance you won’t respond within the appropriate window of time. But an online management tool lets you respond immediately, keep track of responses, and organize the dispute.
Go to BAMS to find these and other tools for your company’s payment processing.
All chargebacks are frustrating, but it’s even worse when they happen because of fraud. Then, you not only lose the transaction but the merchandise as well. This alone is enough reason to make sure you stop fraud before you send out any products. Here are some of the chargeback prevention ways that you can armor your online store against fraudulent purchases:
The Zip Code Check
These checks are basic, but they block a surprising amount of suspicious transactions. One of the most standards is to collect the would-be buyer’s name and address. Then, use a shopping cart that sends that information to Authorize.net along with the credit card number. Set your Authorize.net account to compare the zip code on file with the credit card company against the one you were given. If they don’t match, it automatically declines the transaction.
Have Proof of Shipment
One of the most common ways to commit chargeback fraud is done by the criminal ordering things and then claiming non-receipt. Stop this nonsense by shipping everything using methods that give you tracking numbers and proof of delivery. All of the major shippers have an option that provides these things, and it’s worth it to use those options. Then if someone claims non-delivery, you can give us or a card-issuing bank the number to prove that your package indeed arrived.
Having this information at hand also helps you when the customer legitimately hasn’t gotten an item. You’ll be able to look up the tracking and see exactly where the package is in the shipping system. You can almost always get someone to be more patient if you can provide a detailed answer to the question of “where’s my stuff!?.”
To learn more about how to prevent fraudulent chargebacks and other problems, just contact us. We’ll be glad to help you make your business go more smoothly.
Chargeback prevention is one of the foremost concerns of online merchants. It’s always galling to have to send money in the wrong direction, and it’s even worse when the reason for it is outright fraud. With fraud, you’re not only out a sale but often, you lose your merchandise as well. Fortunately, there are ways to catch most of it before your products hit the shipping stream.
Use a Merchant Account with Fraud Prevention Tools
A merchant account that offers the right settings will, when those settings are properly tuned and activated, do much to increase your chargeback prevention success. Some of the typical options include automatic checking of the delivery zip code against the zip code of the credit card holder’s billing address, checking the card number against a database of stolen numbers, use of the Cardholder Dispute Resolution Network, instant notification of payment disputes, and more. The Cardholder Dispute Resolution Network is a fairly new system that allows chargeback and dispute information to be shared between card issuers and merchants and can let you spot a serial refund-seeker before you complete a transaction.
Manually Check Any Suspicious-Looking Order That Gets Through
Sometimes, even the best automated systems aren’t enough. This is why you should always check strange-looking orders – especially those for unusually-large amounts of merchandise – for fraud. Check Google Street View to see if the destination address is a vacant lot, look up the phone number the customer gave you as well as calling it, and check the origin area of the IP attached to the order.
These are some of the best ways to prevent online ordering fraud and the chargebacks that go with it. If you need a merchant account that will automate much of the work, just contact us. Our Chargeback Defense system is just what you need.
From time to time, chargebacks are an unavoidable part of being a merchant — like returns and customer complaints. Chargebacks are much more costly to your business, however, and while you might not be able to avoid them completely, you should be taking steps to prevent as many as you possibly can.
As we see criminals becoming more sophisticated and cases of online theft and fraud rising, it’s more important than ever for e-commerce stores to protect themselves from chargebacks related to fraud.
Verify that information.
It can be hard to ensure the person using a card online is really the person who owns the card — unlike face to face transactions, it’s a lot harder to simply ask for an ID and make sure names and faces match. Many payment gateways handle these processes automatically. There are still steps you can take yourself to reduce chargeback fraud, however.
- Collect all of the customer’s information — Full name, billing address, billing phone number, and shipping address.
- Use the Address Verification System (AVS) to make sure the provided information is valid.
- Use the security code on the back of the card to authorize the transaction — this is usually 3 or 4 digits, depending on the card issuer.
- Use a delivery service that requires signatures, especially for high-cost items or sales.
- Have a clear policy in place about shipping to addresses that don’t match the billing address. For example, if you sell a product that’s commonly shipped as gifts to other people, make sure you’re still protecting the paying customer.
You can also consider recording customer’s information such as an IP address or device ID when processing online purchases, which will help protect your business and provide vital information for investigations should a fraudulent transaction occur.
It’s wise to also be cautious when shipping and receiving orders from overseas, or when you’re processing transactions that are much larger than usual — make sure you’re taking steps to verify all the information is valid.
Keep communications open.
While sending your customers emails about every step of the shipping process may seem a bit pushy, it’s actually a wise idea. Letting your customers know what’s going on with their order not only keeps them abreast of the situation, but it also shows them that you’re paying attention to them and they matter to you as a customer.
Follow up emails and phone calls can also help catch fraudulent transactions before they get too far. Getting an email or a phone call right after a purchase occurs can alert a customer to stolen information immediately, which will allow them to work with you and their card company to handle the matter quickly and efficiently. If they don’t see it until their card company alerts them to fraudulent purchases OR they see the charge on their bill, well, here comes the chargeback!
Working with the right merchant services provider can help you automate these steps, which will save you time and money, protect your business, make your customers happy, and give you peace of mind. You’ll never be able to prevent ALL chargebacks, but that doesn’t mean you can’t take steps to keep those numbers and costs as low as possible.