Are you here because you had a customer make a chargeback which made you lose your precious time and money? Or perhaps you are simply being proactive? If it’s the former, I am sorry to hear! It’s time to leave your bad experience in the past, however, and look toward the future. Welcome to my guide that can help you be ready for disputes.
Chargebacks are here to stay. If you have already had a few chargebacks filed against your company, there is no guarantee that you will not suffer more. To comprehend what chargebacks are and why customers file them, read this. To expertly handle the chargeback process at every stage and fortify your company’s resilience to chargebacks – keep reading!
1. Stay bonafide
Since chargebacks are often the result of doubts about the transparency and integrity of a company, my first advice has to be to stay legit. Make it difficult for a customer to doubt your products or services, or your intentions, for that matter. In the USA, there is an organization called the Federal Trade Commission which provides protection to American consumers and outlines some focal regulations for businesses. It is a good idea to comply with these regulations at all times. Consumer protection organizations exist in many other countries, so research your local regulations.
Let’s review some examples. If your product or service has testimonials on your website, especially positive ones, they must be certifiable. Some companies publish their positive testimonials and, as you can imagine, they often cannot be tracked to real people, making them look suspicious. Also, endorsement on your website must only be used with written consent from the endorser.
You can always hire a great PR/marketing team to improve your public image and motivate customer reviews. Last but not least, the Terms & Conditions, pricing/charging information, and other vital policies on your website must be easy to find. Do not minimize the font for any of them, and don’t try to hide them!
2. Accuracy above all!
Your customer should know what he is purchasing. This way, you can avoid complaints about the product or service not matching its description. Be as accurate as possible with the details, and do not exaggerate the quality or the capabilities of what you are selling. In other words, stay away from deceptive marketing!
For example, if your product is not made from environmentally friendly materials, do not lie saying it is. When necessary, include easily-accessible information about the manufacturing process and location of the product, as well as about the materials used in making it. Make sure that you set the right expectations for the results of the services you are selling. Otherwise, you may face the risk of chargebacks.
3. Better safe than sorry
Every payment card processor has a protocol by which you should abide. After all, it is a mutual goal for both you and your card processor to avoid chargebacks at all costs. While for card-present transactions, it is sufficient to check the expiration date and the card security code before it gets swiped, there are some extra steps for CNP (Card Not Present) transactions. If you accept card transactions online, you may want to track any possible information that can help you dispute a chargeback if filed. This includes, but is not limited to, the IP addresses of your customers and their digital signatures.
It is a good idea to employ additional payment verification for your customers’ transactions. It is considerably harder, if not impossible, to file a chargeback of a transaction that has been verified by the customer through services like ‘Verified by Visa’ or ‘MasterCard Secure Code’. This is called ‘3D Secure,’ and it requires customers to confirm their payment by entering a code that gets sent to them via SMS or a token verification system device. If, on the other hand, you ship your goods across cities and/or countries, getting proof of delivery should be essential unless you want cyber fraud to ruin your business.
4. “Hmm, that’s suspicious…”
Always be on the lookout for suspicious activity. Having a fraud prevention strategy must be your priority. Certain countries are at higher risk than others, so do not hesitate to create a so-called ‘blacklist.’ Review all payment attempts as well as transactions carefully. If something seems off, call your customer to verify the order. “What should I consider suspicious?” You may ask. Here are a few examples:
- A credit/debit card security code was entered incorrectly
- The billing address not matching the shipping address
- The shipping address indicating a freight company (or any other irrelevant location)
- Multiple orders with the same shipping address
- A sudden spike in international transactions
- Numerous transactions made during an odd hour
- A single customer ordering too much of the same item
- A peculiar e-mail address entered
5. Records for the keeping
Staying organized never hurts. On the contrary, it is one of the key qualities to running a prosperous business. Dealing with chargebacks requires you to look back into the past and provide information about sales you thought were safe in your pocket. If you do not bother keeping records, you are in trouble.
Most frequently, chargebacks are possible for any transactions collected within the last six months. Customers can convince their banks, however, to go as far back as two years. That is why you need to keep accurate records of transaction information such as dates, amounts, IP addresses, receipts, and/or contracts.
6. Get unquestionable proof
One of the best ways to successfully dispute a chargeback is to present the customer’s consent to the transaction in question. If possible, always get your customer to agree to each separate transaction they make, especially if the payments are automatically recurring. You can do this by either collecting proof in writing (electronically or on a written contract) or making sure the customer authorizes the amounts outlined per period agreed with no card present. Such supporting material is undeniable when the customer attempts to commit friendly fraud.
7. How about a refund?
Some customers claim that they have filed a chargeback just because it had not been apparent how they could request or receive a refund from the company in question. For this reason, any information about refunds (or returns) for your products or services should not be difficult to access. Don’t hint that refunds or returns are difficult to get. That demotivates a customer from communicating with you. Make sure your policies regarding refunds or returns are explained in a straightforward, transparent, and not intimidating manner.
8. Where’s my order?
Do not ever make promises you cannot keep. By doing so, you will increase your chances of chargebacks. If your company ships your goods or offers delivery via a third-party service, you must understand that there may be factors outside your control. Traffic, weather, human errors, and other incidents can affect delivery times and dates. Therefore, to avoid frustrated customers who did not receive their products on time, provide realistic expectation dates. Even better, provide a time frame when customers can expect their goods. If there are any issues with the delivery, alert your customers immediately!
9. Follow the trail
Imagine you get an order, ship it to your customer, and then suffer a chargeback because he claims to have never received it. Yes! Some people would use all possible circumstances and loopholes to cheat the system. So protect yourself! Use a delivery company that offers online tracking of the shipped items. This way, you can see at which stage of delivery the goods are and pinpoint when your customer receives them. In addition, have your customers sign off upon receiving the order, especially for deliveries of expensive products. Their signature is proof of reception.
10. Got insurance?
Not only can shipping insurance be handy when expensive or fragile goods get damaged in the delivery process, but it has additional benefits! Many shipping insurance deals include the ability to track your goods in delivery, something that I mentioned in the previous point is quite vital. As a cherry on top, you can also receive a notification upon the completion of delivery. Insurance is a small price to pay for peace of mind. It helps you save more money in the long run.
11. A company beyond identification
Nowadays, we tend to make several transactions per day using our payment cards. Upon checking our bank statements later, we can skim through the various transactions we made and recollect what we spent our money on. Each charge is marked by a payment descriptor – a merchant name associated with the deducted amount of money. Naturally, it is the payment descriptor that helps us remember where our money went. So, if the payment descriptor does not match the actual name of your company even closely, your risk of customers making chargebacks increases.
Once, I was scrolling through my purchase history using my bank application, and I came across a large payment made some weeks before that to a payment descriptor containing a bunch of letters OOO XQLPS. I tried to remember what did I buy. Nothing came to mind at all.
Unfamiliarity as such can be dangerous. Unless you inform your customers that your payment descriptor is not the same as your business name, nothing can stop this confusion. Even better, include your phone number in the payment descriptor in case one of your customers does not recollect making the transaction.
12. Chargeback incoming!
Credit card processors can send merchants notifications about any possible charges disputed by customers. It is an incredibly useful feature that you should utilize, so make sure you sign up for such notifications. They allow you to address the issues that caused the chargebacks faster and more proactively.
As soon as you know that a customer is disputing the charge, you can contact the customer and clarify the situation, possibly resolving the issue before it is too late. This also allows you to refund the transaction to avoid additional costs associated with chargebacks.
13. Nothing beats outstanding customer service!
There are no skills like people skills. You know it! Think of it – the chargeback mechanism is used by unhappy customers. Either they have experienced fraud and lost their money, or they came across confusion regarding their payments. From a customer’s point of view, it is much easier to file a chargeback than to ask a company for a refund. Some customers are not used to speaking with customer service at all!
Your customer service team should be expertly trained to handle any situation that involves chargebacks. In case the incoming call is from the customer’s bank, they should insist on speaking with the customer directly via a conference call. This shows that your company is willing to resolve this misunderstanding and you respect the customer’s private information. Demonstrate that you are fully prepared to handle the issue and provide a refund if necessary. How do you provide that top-notch customer service that prevents chargeback?
Before anything, make your contact information easy to find on your website. If your customers need to complain about something or clarify a transaction, they will reach you. Have your contact details visible anywhere you believe a customer may encounter a payment concern.
- If your resources permit, consider having 24/7 customer service availability, especially if your company is international and you operate in multiple countries with different time zones.
- Ensure your customer service team is responsive and handles requests swiftly to avoid customers who file chargebacks because “the company did not respond to my complaint.”
- If you notice any inconsistency in an order placed by a regular customer, contact them to verify their order. Pay particular attention to the content of the order and the number of items ordered.
- Train your customer service team to recognize that a customer may have already contacted his bank to file a chargeback and that your company is lucky to have the chance to prevent it. Banks usually recommend customers contact companies about any charges before proceeding with chargebacks. If that is the case, this is an incredible opportunity to discuss the situation directly with your customer and perhaps even offer a refund.
- Your customer service representatives must be extra empathetic, informative, and as detailed as possible when clarifying the charges in question. Any confusion here could lead to chargebacks. The customer must feel like your company is on his side, not that he is in a fight for their money.
14. Damage control
As you probably noticed, I have mentioned a few times in this article that making a refund could be a possible solution to stop a chargeback. That should not come as a surprise. After understanding how chargebacks can damage your business, you should be able to agree that it is better to lose the transaction value rather than deal with additional fees, time, and loss of reputation.
Do not consider this a lost battle. If you are to come to this decision, there must be a lesson to learn somewhere. Perhaps your prevention protocol needs reconsideration? Maybe you are dealing with a non-cooperative customer. Is the customer’s bank unforgiving? Make a smart decision depending on the situation.
15. To dispute or not to dispute?
That is the question. Do you assess that you have a high chance of winning your money back? Do you have the necessary material to dispute a customer’s chargeback? Is your case constructed well enough not to drag you into an endless battle that may end in arbitration?
It is imperative to make it known if you are an innocent merchant that has not wronged its customer. Sometimes though, you should put business before pride. If disputing the chargeback appears to be too complicated, it probably is. Some companies hire firms specializing in fighting off chargebacks. My advice is to restrain from this decision if you are confident that you can save capital with proactive measures.
16. Live and learn!
Akin to the standard known failures we all see in life, lost chargeback battles can teach you a lot. Why waste such valuable knowledge? Now you know the possible weaknesses in the way you run your business. Now you can do some damage control and fortify your business. Always maintain a record of cyber thieves, abusive customers, fraudsters, suspicious behaviors, past lost battles, and loopholes spotted in your company.
17. Review your defensive strategies
Since bank policies and regulations tend to change quite often in the area of the chargeback mechanism, you should stay in the loop about what’s happening. Based on industry changes and past experiences, you should consider reviewing your chargeback prevention protocol and tactics periodically. Set yourself a plausible review schedule. It could be every 3, 6, or 12 months. Otherwise, they may be outdated, which is bound to work against you.
It is frustrating, yes, that you have to go through all this extra knowledge to stay witty and prosperous in your industry as a hopefully honorable business owner. You have just reinforced your mind with some golden info and invested your time into understanding prevention tactics that can help you save time and money in the future. So, on that note, congratulations.
Now engrave these strategies into your business model and stay safe from fraud and cyber theft. If you need your staff to understand chargebacks better and learn how to prevent them, reach out and let’s discuss how I can help you.
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