Chargeback protection is imperative to analyze, prevent, and fight chargebacks no matter the size of your business. A chargeback occurs when a customer files a dispute with their bank over a debit or credit card transaction. These banks often have a cardholder services disputes team that investigates the customer’s dispute request.
While some disputes are done for legitimate reasons like fraud or ecommerce merchant error, the vast majority (50-80%) is from what’s called “friendly fault”. This is when a customer initiates a dispute for an illogical or unethical reason. Merchants are not notified in over half of these disputes, leaving them defenseless to prevent a chargeback.
The Cost of Chargebacks
Failure to prevent a chargeback lost U.S. merchants over 1.32% of revenue according to a study by LexisNexis. Another statistic from this study shows that large e-commerce businesses spend $115,000 or more on credit card fraud protection for merchants. Even with this investment, they will lose a large percentage of their revenue due to fraud. The cost of not having chargeback protection leads to increased costs, loss of revenue, and potentially the business’ reputation.
Chargebacks Affect Many Businesses Types
Preventing chargebacks is a concern for any business that accepts debit or credit card transactions. There are some businesses that have higher occurrences of chargebacks. These business types include:
- Adult Entertainment
- Antiques & Collectibles
- Auto Parts & Accessories
- Cigars & Smoking Accessories
- Credit Repair
- Debt Consolidation
- Downloadable Software
- Educational Seminars
- Luxury Goods/Services
- MLM & Direct Sales
- Moving Companies
- Penny Auctions
- Sports Betting
- Tech Support
The reason for this stems from the business’ propensity for high ticket sizes, higher risk product sales, and high volume. Each business’ propensity for chargebacks often marks their business and requires them to get high risk credit card processing in order to function day to day.
Preventing Chargebacks for Good
Chargeback protection is something that your business should always be optimizing for, both internally and externally. One way that you can fight disputes is keeping a record of all your transactions. The key to preventing chargebacks is having documentation that proves the customer authorized the charge. Copies of receipts, both printed and emailed, can be used as evidence in these cases.
In cardholder services disputes, many times the customer will get a conditional refund on a disputed charge while the bank finishes its investigation. During this period, the merchant can provide the receipt to the bank to show that the charge was valid. Sometimes a customer also forgets that they made the transaction or don’t recognize it on their statement. The actual receipt could help jog their memory and win your case against the chargeback in question.
Another method to use for chargeback prevention is providing exceptional customer service. This means having convenient customer service hours, live chat, and service level agreements that quickly resolve issues. Representatives who are well-trained and empowered can look for ways to save a request for a refund and prevent a chargeback from occurring.
Consider a Chargeback Management Solution
The strategies shared above are helpful in preventing chargebacks. But in order to systematically fight chargebacks, it requires a more encompassing solution. Many of the controls that are out there only target general fraud and cause a more time-consuming process for the merchant.
Cloud Merchant understands the necessity of chargeback protection for merchants to help prevent a chargeback and reduce the payment processing risk. Merchants who partner with us receive a comprehensive, multi-layer approach that identifies and mitigates chargebacks and their common risk factors. It provides insight on how to avoid chargebacks by:
- Putting all of your data on a single platform to allow for efficiency
- Enabling real-time merchant alerts starting from the initial dispute
- Responding to customer disputes and monitoring them to resolution
- Reporting in real-time so you can take proactive measures
- Preventing alert analytics that can identify future chargeback trends