DIY Tips for Avoiding Chargebacks

How to Prevent Revenue Loss and Avoid Chargebacks

The recent adoption of EMV card policies has merchants worried–and rightly so. Studies have shown that in countries where the EMV standard has been put into place, credit card fraud (and by extension, chargebacks) has significantly increased as criminals move their efforts to online merchants.

With the rising threat of chargeback fraud, merchants must establish prevention policies now to avoid chargebacks later.

Preventing the Three Causes of Chargebacks

All chargebacks stem from just one of three reasons: merchant error, criminal fraud and friendly fraud. Avoiding chargebacks successfully requires attention in all three areas.

Avoiding Merchant Error Chargebacks

Merchant error is a result of oversight and inattention to details that can cause revenue loss. Here are the steps to avoid chargebacks due to merchant mistakes.

  • Establish a return and cancellation policy that outlines corporate procedures. Post the policy in a conspicuous location. Ask consumers to accept the policy before processing any transactions.
  • Write descriptive, accurate information about products and include detailed pictures.
  • Follow business best practices by checking processing procedures: obtain authorisation, don’t process transactions that have been declined, submit transactions in a timely fashion and only process transactions once.
  • Use Dynamic Currency Conversion correctly.
  • Ship products before charging the consumer’s card.
  • Provide detailed information about the shipping process. Make sure the customer understands when the items will be shipped and when they will arrive.
  • Establish easy to identify billing descriptors with billing contact information, including either phone number or email.

Avoiding Criminal Fraud Chargebacks

Most merchants worry about chargebacks as a result of criminal fraud more than other two types of chargebacks, mainly because it is the most-often heard about. Criminal fraud occurs when a consumer’s credit card information is stolen and used to make fraudulent transactions. The consumer files a chargeback when the unauthorised charge is discovered.

Avoiding chargebacks because of criminal fraud requires the merchant to take advantage of fraud detection techniques.

  • Automated fraud detection systems developed by MasterCard (MasterCard SecureCode) and Visa (Verified by Visa) prompt cardholders to enter predetermined information before processing a transaction. Incorrect information results in a terminated transaction.
  • Card identification numbers (often referred to as the card security code) are printed directly on the cardholder’s card. These numbers can be used to verify the physical presence of the card being used for the transaction.
  • Address verification may be used to compare the address on file with the banking institution to the address being used in a transaction.
  • Fraud filters, when used correctly, can eliminate virtually all chargebacks due to criminal behaviour.
  • Merchants can sign up for chargeback alerts, which are notifications sent when a cardholder files a claim based on criminal fraud. These alerts allow the merchant to issue the cardholder a refund.

Avoiding Friendly Fraud Chargebacks

Also known as chargeback fraud, friendly fraud is the most common form of fraud a merchant may face. Consumers take advantage of lax chargeback regulations and contact their bank directly to avoid having to deal with merchants and process a return. To avoid chargebacks from this type of consumer, merchants should follow these prevention methods:

  • Improve customer service. Cardholders are looking for the easiest method of making their return or getting assistance. By ensuring that the customer service they receive from you is top notch, the customer will discover that dealing with the merchant is just as easy as dealing with the bank.
  • Create (and post) customer friendly policies and procedures. A well-written return policy must be posted for consumers to find. The savvy merchant will employ a ‘no questions asked’ return policy, making it extremely easy for customers to return merchandise.
  • Handle recurring payments carefully. Charge cardholder accounts correctly and at the agreed upon time. Notify cardholder of any changes ahead of time.
  • Offer delivery confirmation to prevent ‘not delivered’ chargebacks.

Avoiding Chargebacks With Tactical Representment

Representment is equally as important when trying to avoid chargebacks. By filing a representment, banks are notified that the merchant is innocent of wrong-doing.

Additionally, consumers are confronted with the realisation that illegitimate chargebacks are unethical and they will not get away with it.

Avoiding Chargebacks and Retaining Revenue

A merchant has two options for handling their chargebacks: take care of the issue themselves, or outsource their chargebacks to a specialist.

Chargebacks can be dealt with through the efforts of an in-house chargeback coordinator, but many merchants quickly discover that they are in over their head. For a guaranteed ROI and higher representment win rates, merchants are turning to the professionals. Regardless of a merchant’s need, customised plan can help protect the revenue and reputation of the merchant.

If your company is ready to move beyond in-house chargeback management, contact us today to learn more about your money-saving options.