How to Mitigate Chargebacks and Fight Fraud Effectively in 2021
Dealing with chargebacks is a part of the business process for most merchants. The problem becomes especially serious when they happen on a regular basis. Not fixing this issue will only make the situation worse, so overcoming it in a way that will help prevent future chargebacks is the best strategy. Here are some ways to minimize the number of chargebacks and make your business more profitable.
Chargebacks: What They Are and Why They Happen
When a customer purchases a service or a product from you using a credit card and requests their bank to return costs further, a chargeback might take place. Chargeback fraud prevention should be a priority for any merchant, as it’s impossible to grow a business when chargebacks happen all the time. There can be several reasons why this happens, and the most common ones include merchant error, fraud, and also a so-called friendly fraud:
- Merchant error
When it comes to dealing with chargebacks, this is the part that fully relies on you establishing efficient business practices. It is essential to provide timely and transparent services, as you will otherwise have to deal with chargebacks all the time. Some of the situations when a customer will request a chargeback include getting a product that doesn’t look like the picture, not receiving an item or others.
- Fraud
In the case of fraud, a person uses the information of another cardholder to purchase a certain item. As the actual cardholder doesn’t want to buy anything, they notice the illegitimate operation and request a chargeback. They get a refund but the problem is that a business owner not only has to return the money but also pay a chargeback processing fee.
- Friendly fraud
In this case, a person uses their own credit card information but they decide to dispute their charges. This can happen when a person decides that they no longer want an item they paid for or they forgot about it. Another common reason is that someone in the family made a purchase using a relative’s, and now they want the money back. Regardless of the cause, the business still suffers consequences.
Ways to Prevent Potential Chargebacks
If you don’t want to be a silent observer and strive to make improvements, there are several steps you can take to prevent these unfortunate situations:
- Focus on your business practices
When you provide photos of products, delivery information, dimensions, and other details, you should be as clear as possible. If there is a difference between what a customer orders and what they get in the end, nothing will save you from constant chargebacks. There should be a separate section on the site with shipping information so that customers know when to expect their orders.
- Pay attention to payment descriptors
Your payment descriptors should be easily identified by customers. It often happens that a person forgets about their purchase, and when they see a transaction they don’t recognize, they can file a chargeback immediately. It is best that your payment description fully matches the information people see on your site.
- Use apps and software
There are different tools out there that you can use for chargeback prevention. Their purpose is to use identifiers, such as email, device ID, and others, in order to minimize the number of bots and fraudsters.
- Make your customer support the best it could be
You should ensure that it’s easy to contact your customer support when a client experiences a problem. It is important to offer several ways to contact your team, so a person can choose the most convenient one. In most situations, it is always better to provide a refund because you will lose more money on chargeback and fees.
- Always verify suspicious orders
There are often situations when fraudulent activity can be recognized when it’s happening. You may notice customers from other countries or there can be attempts to make extremely large orders. There can also be many failed attempts to complete in order. All of these can be signs that it is fraud or friendly fraud. You should always verify such orders by contacting a customer directly and confirming their card information and address.
Deal with Chargebacks Before They Get Worse
If you notice that the number of chargebacks is increasing, it is time to take appropriate steps. It should be a combination of making sure you deliver the best services possible and also using modern chargeback prevention tools. With the help of such instruments, you can make a profit and avoid not only chargebacks but also fees associated with them.
Do you deal with chargebacks in your business? Do you know other effective ways to prevent them? Please, tell us what you think in the comments and share this article with others.
