Chargebacks are an unfortunate reality for all eCommerce businesses, large and small, but too often, the full extent of their damaging effects is overlooked. These fees not only hurt a business's bottom line; they also chip away at shopper loyalty and risk relationships with retail partners—all in all, adding up to lost revenues for the company.
In this article, we'll discuss why chargebacks are detrimental to any organization's success and explore ways they can be avoided or reduced.
What is the meaning of Chargeback?
Chargebacks are disputable transactions triggered when customers contest a charge they made to their credit card with the card issuing bank. If a client gets a chargeback approved, the merchant will refund the money. This is to protect the customer from fraudulent or unlawful purchases.
Chargeback claims are made for various reasons, such as theft of credit cards, damaged or broken products, bad customer service, duplicate payments, and more. Of course, some instances are accurate; however, many fraudsters profit from their power.
Due to fake charges and fraudulent customers, many companies and industries are losing millions of dollars every year. Although the merchant may be able to fight the Chargeback through documents and proof through its bank account, in most instances, the consumer prevails over the case.
Too many chargebacks will get you blacklisted; businesses must do their best to discover the origin of all chargebacks and then take steps to prevent them from happening in the future, even though it is impossible to avoid them.
How can chargebacks harm your Business?
Chargebacks can cause damage in the short term and the long run. Each time you complete a chargeback, you'll lose any revenue generated by the transaction and any goods you delivered or services supplied, and you'll always be liable for a chargeback to the acquirer.
In the event that your rate of the Chargeback (chargebacks concerning the total amount of transactions) exceeds a certain level, you're charged higher processing costs or lose your merchant account completely, usually with shorter notice than you'd like.
If this occurs, you'll need to find a merchant processor willing to cooperate with "high-risk" merchants at high-risk rates to stop your Business from going under.
How can your Business avoid Chargebacks?
You can minimize your risk of a chargeback by following five easy steps to keep your genuine customers' content and stop criminals who want to take a slice of your company.
1. Give clear and concise information to customers.
Your descriptions of the product and images should be correct, so buyers don't get surprised when their goods arrive. The return and shipping policies should be displayed on every website to let customers know what they can anticipate before buying.
Be sure that the billing descriptor on your customer's credit card statements is easily identifiable; you can use your shop's name or any other term you've advised customers to look for.
2. Keep track of your shipping.
Package tracking helps everyone. Customers will not believe the package has been lost if they know its progress. Fraudsters can't claim the package didn't arrive when you can prove it did.
3. Provide great customer service
Contact information for customer service should be on each page of your website and on every receipt you send in each package you send. Assistance round-the-clock and a welcoming attitude will reduce the chance that clients will head straight to their credit card company to solve their issues.
4. Check your transactions for fraudulent transactions.
Your processor, a third 3rd-party fraud prevention service or your internal team could be alerted to red flags, such as addresses for billing and shipping that do not match, large-value purchases made by new customers, and a lot of purchases on the exact IP within just a few days as well as purchases from areas where there are the highest rates of fraud.
5. Keep accurate transaction records.
The more details you can record for every transaction, the more accurate. Certain information is required, such as the amount, date, cardholder's name, and other basic information.
Do more than provide what issuers of cards referred to as "compelling evidence" - delivery signatures, emails from customer service that confirm that the item was received, customers' IP addresses, telephone numbers, and much more. Every issuer has different regulations that you must be aware of.