Chargebacks can be both an effective tool for protecting clients’ rights and a way of fraud. In any case, they can negatively affect your business and damage your reputation. To be safe from any consequences of such returns, you have to use modern chargeback prevention solutions. With their help, you will be able to resolve disputes in almost real-time and protect yourself from the actions of fraudsters.
While chargebacks caused by mistaken payments are essential tools for any shopper that protect customers from dishonest sellers, they can be a serious business problem. Large financial institutions set limits on the number of chargebacks; on average, about 1% of all transactions. If this figure is exceeded, your merchant account might be temporarily frozen or even closed.
Besides, if the request for a refund comes not from an actual client but a scammer, you risk losing both money and the product which has already been sent. Of course, you can challenge the decision if you think it is unfounded, but all this takes a lot of your time. All such actions might have a negative impact on your reputation, which will entail a loss of customers. Preventive measures should be taken to reduce chargeback volumes and minimize risks.
Fortunately, the set of measures that can help prevent exceeding the limits of chargeback transactions is quite extensive. It includes both simple steps you can take on your own as well as complex business solutions that anti-fraud platforms offer.
Each product, item, or service that you post on your site needs to have a thorough description, a complete list of features and functionality. After reading this information, a buyer should have a clear idea of which item they intend to buy. It will reduce the risk of possible misunderstandings. Moreover, if the provision of your goods and services involves regular debiting of funds from the client’s card (for example, for a monthly subscription), you should inform them about it.
A responsible merchant should provide superior quality in their products and services as well as customer support. If there are no complaints from buyers about your staff’s work, it significantly reduces the likelihood of requests for refunds. Besides, prompt customer support will allow you to quickly resolve conflict situations and look for alternative ways out of them through a dialogue with clients. All of it will have a positive effect on your reputation and increase your demand on the market.
The document that describes all the conditions for the refund and the terms should be freely available on your site and located in such a place that even an inexperienced user could find it. When paying for goods or services, customers should familiarize themselves with the offer agreement and understand the obligations and rights of all parties. List any cases in which buyers can exchange purchases or receive a refund. When disputing a chargeback and any other conflict situation, you can appeal to the contract’s text with which a client agreed.
Professionals recommend keeping all the receipts, tickets, and other documents confirming payment and provision of services for at least three years. If you have to dispute a refund, it will be your proof that all obligations have been fulfilled on your part. Additional data can often come to your aid, such as the exact date of shipment of goods, correspondence with a client, screenshots of some key moments, and so on. If a person is your regular customer, provide their purchase history for the past few months.
The previous points are primarily relevant in situations where a real buyer requests a refund because they were unsatisfied with a product/service or made a wrong purchase. However, to prevent fraudulent transactions, you should use more sophisticated security methods:
- Multi-factor authentication. This solution helps you make sure that it is the actual owner of a card who makes the purchase. If you use multi-factor authentication, it is more challenging for fraudsters to steal different customer data.
- Request CVV. A combination of three numbers (usually on the backside) is needed to verify the authenticity of a card.
- Chargeback alerts. Suppose a client issues a chargeback claim despite the measures you have taken. In this case, you will almost instantly receive a notification about it and will be able to address the situation directly to avoid pying the chargeback dispute fee and affecting your chargeback ratio..
- Device fingerprinting. This solution allows you to identify scammers by analyzing the devices they used. Based on the information received, you draw a conclusion about the reliability of a client and, if necessary, take appropriate measures.
The actions described above should work together. A set of measures can help you prevent unnecessary payments from your customers and protect your business from fraudulent activities. As you can see, some of them are not difficult to apply in practice.