If you run an eCommerce store, you must have been wondering how you can prevent chargebacks.
Is there a plan, a strategy, or a remedy that can completely halt chargebacks?
Unfortunately, the answer is no.
However, you can do a lot to prevent chargebacks for services and products to some degree. After all, both merchants and customers hate it when problems need to be resolved by chargebacks.
If you want to avoid annoying chargebacks in the future as much as possible, keep reading. In this post, you will find seven simple ways that will show you how to prevent chargebacks.
But first, let’s see why a chargeback happens in the first place.
Why A Chargeback Happens
The reasons for requesting a chargeback vary. Knowing the most common reasons will help you learn how to prevent chargeback cases.
1. Didn’t receive goods
A customer may not receive the purchased goods or their goods arrived later than expected. There are many reasons why these can happen.
Sometimes, a package gets lost. Sometimes, it’s due to shipping problems, and sometimes, merchants even try to run scams.
The only logical thing to do when this happens is to raise a dispute and request a chargeback. To solve this issue, companies often take a look at a record of who has signed delivery papers.
2. Not billed correctly
There are cases where customers pay more for a certain product and they request a chargeback.
This is called duplicate processing. It happens when the card issuer receives the same transaction twice (or more) and charges the customer’s card accordingly.
This can be caused by human error. Sometimes the customer duplicates a purchase inadvertently. But sometimes, a clerk makes this mistake. There are also cases when technical errors happen on the merchant’s side.
3. Damaged goods
When shipped from faraway countries, goods can often get damaged while transported. This also means that they don’t meet the description and customer’s expectations.
If a customer is not able to secure a refund, there is a high chance of resorting to a chargeback. When the goods arrive damaged, it’s really easy to win a chargeback as a consumer.
4. Credit card fraud
Credit card fraud happens when an unexpected transaction appears on a consumer’s bank or payment card statement that they believe is fraudulent.
The possible reasons for this include a stolen credit card, data breach, or hijacked payment card details. That is exactly why every eCommerce business needs to prioritize secure purchasing.
5. Not happy with the product
When a product doesn’t meet the description, a customer may initiate a chargeback.
If a customer asks for a refund and the merchant doesn’t play along, the bank can take care of the whole chargeback process.
6. Friendly fraud
Customers sometimes falsely claim a refund even when the merchant has provided products or services as requested.
This way, the merchant gets ‘ripped off’ and loses revenue from selling a certain product. The merchant then has to cover all additional fees.
This type of scam is called friendly fraud since the customer is often not aware of the intricacies of the chargeback process and the additional fees for the merchant.
How To Prevent Chargebacks From Happening?
To effectively prevent chargebacks and involuntary churn, you should take all available precautions. Fight them by addressing their root cause.
Here are some effective steps you can take immediately to reduce the number of chargebacks you get.
1. Offer quality customer service at checkout
This is probably the best way to keep a customer complaint from turning into a chargeback – great customer service, especially at checkout.
In general, you should make it easy for customers to contact your service agents. Each page on your website needs to have at least one clear link to a contact page or address. Adding a live chat feature is also a good idea.
Additionally, encourage contact in the order confirmation and update emails. Should a customer encounter a problem, you want them to contact you first.
Finally, be flexible and generous. It’s better to miss out on a tiny fraction of revenue through cancellations if it means that you will prevent chargebacks and reduce chargeback fees.
2. Make sure you have it in writing
One of the most important things you should do to protect yourself in this situation is to require customers to sign a contract. It should spell out the specific services your company will provide. Nothing more, nothing less.
When it comes to signing, you should leave your customers a couple of options:
- returning the signed contract via fax or email
- electronic authorization (fingerprint)
In the case of a return, you should always have some kind of proof:
- Screenshots of the product page at the time of purchase
- Description or picture of return policy that customer agreed to
- Correct delivery proof (undamaged product)
- Proof of purchase (plus the proof that the right product was shipped)
Finally, ensure that your online ordering system is set up so that your customers will have every chance to read your return, exchange, and other relevant policies before they even confirm their purchase.
3. Display a clear description of the purchase
It happens too often that a customer fails to recognize a transaction on their credit card statement. Then, they report it to their bank as a suspicious charge. This is one of the most common forms of so-called friendly fraud.
Even when they figure out that it is a charge they planned to make, it is usually too late to keep the chargeback from being recorded.
So, ensure that your payment descriptions are identifiable to your customers. The merchant descriptor used by the card scheme needs to be clear. Names that are easily recognized such as the brand name for an online store help reduce chargebacks.
Additionally, make sure the description includes a working phone number. This way, customers always have a chance to contact you before they go to their bank.
4. Improve user-interface
Customers’ frustration often stems from the inability to find answers to their questions on your website. Luckily, there are some simple tweaks you can make to remedy this.
- Make product features, size, and price as clear as possible.
- Ensure that shipping information is clear (pay extra attention to this if you have long shipping times).
- Offer real photos and even record a video preview of your products.
- Send confirmations following each milestone to keep your customers updated.
5. Monitor all purchases
One of the fundamental things you need to do to protect yourself is to keep track of each transaction.
It is of the utmost importance that you keep accurate records of customers’ credit card transaction dates, amounts, and authorization information. You never know when you might need these pieces of information to fight a potential chargeback.
Signed receipts or contracts help too. Even though your options are limited if you fall victim to a fraudulent purchase, this kind of paperwork can help you win a dispute against a customer who is blatantly trying to take advantage of the chargeback system.
Therefore, keep track of all transactions. When you spot something out of the ordinary, always double-check the order and delivery postal codes.
6. Monitor your visitor data
If you plan on fighting potential chargebacks, you will need customer activity logs as they too can increase your chances of winning a dispute.
Record as much user data as you can. Be sure to write down the IP addresses, as they will reveal the customer’s location/region. Also, track activity logs, order histories, shipping addresses, and devices used to make a purchase.
7. Implement anti-fraud measures
Just because credit card companies put a lot of effort into detecting fraudulent practices doesn’t mean that you should do nothing to avoid getting robbed of your money.
- Firstly, you should request signatures for all deliveries.
- Always use address verification services.
- Request the CVV number on the card.
- If you use a CMS for your store, use built-in anti-fraud tools. For instance, if you want to know how to prevent chargebacks with Shopify plug-ins, you should do thorough research on useful security plug-ins.
Another smart thing to do would be to partner up with services with experience in fraud prevention.
Finally, it should go without saying that you need to follow payment processing protocols. Bear in mind that each card-processing network has specific protocols for handling card-not-present transactions.
Following the right protocols will help you weed out fraudulent transactions before they are even completed. On the other hand, ignoring these protocols can result in an automatic ruling against you in the event of a chargeback dispute.
Tools You Can Use To Prevent Fraud
A good tool that will help protect your business from chargebacks and all the damage that comes with it has to include various features and benefits that suit both the merchant and customers.
If you want to learn more about some great software solutions that will help you fight chargebacks, keep reading.
Bolt
Bolt is a full-stack payment processing platform that leverages top-quality fraud protection to improve customer experience and fight fraudulent activities.
The developers behind this tool are so confident in their software solution that they offer a 100% fraud guarantee.
Signifyd
This tool allows you to investigate and follow up on each case individually. In turn, you will be able to maintain a high-quality customer experience and support while still fighting against fraud to eliminate it.
Square
This tool’s checkout systems offer full terminal tools, from online payment processing to in-person POS systems.
Additionally, invoicing, on-file card storage, API customization, and integrations are also available with this tool.
Chargeback Gurus
This software solution was designed to help you fight, prevent, and recover chargeback fraud to better manage friendly fraud cases.
The Root-Cause Analyzer feature identifies reasons for chargebacks using over 40 data points, an ROI calculator to assess recovered revenue, and prevention analysis to understand where to apply prevention methods to decrease the chances of fraud.
Chargeback
This software tool focuses on lowering dispute rates for chargebacks and ensures that fraud is prevented and authentic transactions are approved.
When you approve otherwise rejected payments, you increase conversions by using stronger fraud detection tools.
Chargebacks911
Chargebacks911 belongs to top-notch chargeback protection for merchants’ solutions that reduce chargeback. But, this tool also helps with recovering lost revenue from frauds.
This company partnered up with other high-profile companies in the industry to offer top-quality integrations to fully protect your business against fraud and effectively handle chargeback disputes.
Accertify
Simply put, Accertify is an end-to-end solution that manages the whole chargeback fraud process, from detection, protection, and prevention to management and dispute resolution.
Y2 Chargeback System
With Y2 Payments Chargeback System, you can preemptively identify and stop chargebacks, as well as reverse chargebacks when possible to recover lost revenue.
This tool identifies and intercepts consumer disputes before they escalate to a chargeback.
Verifi
Verifi is full-service payment protection and management solution that can handle your online store platform so you can focus on the essential aspects of your business.
This software solution has features that utilize fraud detection to avoid friendly fraud and capture more revenue.
FIS Global
FIS Global is there to help you resolve chargeback disputes and recover more revenue by capturing payment chargebacks and reducing liability.
This tool will also speed up resolution and settlement timeframes which, in turn, reduces the impact chargeback fraud has on your business.
CUBEbilling
This tool was designed to simplify billing and chargeback data to make financial data accurate and transparent.
CUBEbilling is a cost allocation and cross-charging system that is centered on the premise that understanding costs and revenue leads to better business decisions.
Ethoca
Ethoca is a multilingual support service that relies on a global network of banks and merchants. Its tool is designed for detecting friendly fraud, and chargebacks, and protecting against these detrimental actions.
MiDiGATOR
This is another good option to consider. MiDiGATOR is there to detect and protect against chargeback fraud. However, this tool also automates and streamlines processes to allow a user to focus on building a great product for their customers.
ChargeBackHelp
ChargeBackHelp manages chargeback disputes with full-service software packed with features that include detection, protection, and dispute resolution.
This system features chargeback prevention tools, chargeback representment, and a PCI-compliant payment gateway designed for high-risk merchants.
The Chargeback Company
This software solution focuses on providing a secure and simple checkout for customers.
It services a range of industries including the eCommerce industry, travel, retail, and so on. A software created by one of the most famous chargeback prevention companies, it also provides scalable chargeback solutions that help you manage chargebacks happening on your platform.
BHMI
This is the final tool on this list, but it doesn’t mean that it’s not as good as the other tools mentioned above.
On the contrary, this tool helps you manage chargebacks along the entire transaction lifecycle, including credit card, debit card, ATM, POS, and mobile transactions.
Final Thoughts
There is no denying that chargebacks will always be a risk that online merchants have to face from time to time.
But, with these tips and tools, you can do wonders when it comes to chargebacks reduction.
