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Save your merchant from losses: 5 ways to reduce your chargebacks
Chargebacks are the greatest enemy of your merchant business. It doesn't matter how much capital you pump into your online business, if the rate at which people are requesting for a refund is on a high, there's no way you can stay in business for long.
Unfortunately, cases of chargebacks are not so rare. In fact, they happen too often to be ignored! And according to a ClearSale study, it was revealed that chargebacks cost an average merchant up to 1.47% of their total revenue.
This means that chargebacks cannot be allowed a place, at least not frequently, in your business! So what can you do to reduce them?
Don’t waste your time thinking about that. We’ve got the answer you seek in this post. Read on to learn about the tactics you can use to reduce your chargebacks.
Types of chargebacks
Before we go into the discussion of how you can reduce your chargebacks, it is important to first understand the different types of chargebacks that are there so that you can know what you’re actually dealing with.
- Criminal fraud chargebacks: these are chargebacks that result from the use of stolen cards in your store.
- Merchant error chargebacks: this happens when a merchant makes a clerical error, such as duplicate or incorrect billing amount.
- Service error chargebacks: these types of chargebacks result when a merchant delivers something different from what the customer has requested.
- Friendly fraud chargebacks: in this instance, a tech-savvy shopper detects the loopholes in a merchant’s refund policy and seeks to exploit them.
How to reduce chargebacks Make your store/website super-secure with fraud filters
In order to rid your business of criminal chargebacks, you have to ensure that the payment processor you use on your store is one that offers fraud filters. One such payment processor is iPayTotal.
But what exactly are fraud filters? You may wonder!
Well, fraud filters are security tools that confirm the source from which a transaction has been sanctioned. And there are two of them in the eCommerce world, which are the Address Verification System (AVS) and the Card Verification Code (CVV).
For payment gateway services like iPayTotal, a secure transaction is not one that features only the name, card number, or bank details of customers, but one that features information that only a true cardholder can have.
Once you start receiving payments through iPayTotal, customers will be required to enter their AVS or CVV number anytime they try to complete a payment process on your store. Once they enter either of this information, the gateway service of iPayTotal will then compare the supplied info with the available bank records to confirm the authenticity of the card. If any trace of fraud is suspected, the transaction would be declined automatically, thereby saving the merchant from a possible chargeback by the fraudster or the cardholder’s bank in the future.
This type of service is particularly helpful if you’re running a high-risk merchant account business like eCommerce, Forex, Gambling, Legal services, Financial services, etc. because there is a great possibility for chargebacks in these types of businesses.
So before you start receiving card-not-present payments for your high-risk merchant business online, be sure to use a payment processor like iPayTotal for your payment gateway services.
Be clear on your statement descriptions
Before a customer checks out of a store, they receive a statement notification confirming the details they’ve supplied, as well as the details of the merchant. Now, you want to make sure that there are no confusing or contradictory terms on this statement description because if there are, it could result in chargebacks.
For example, if you normally use a merchant descriptor that is different from your business name, be sure to include that business name in the statement description so that the customer will easily recognize the transaction. This is especially important for high-end merchants with many DBAs (“Doing business as”).
Use customized fraud detection strategies
There is no denying that the major reason for chargebacks are frauds. So in order to further broaden your efforts against the perpetration of fraudulent activities on your store, be sure to consult your payment processor on the ways they can assist you in minimizing your liability.
Usually, if you’re using a modern-tech-driven payment processing service, they should be able to help you design some fraud detection and prevention strategies that fit your business needs.
Once again, you can trust iPayTotal to help you out on this front. Their gateway service includes a PCI Level 1 compliance, real-time proprietary risk rules engine, and global validation tests.
Be clear and careful with your refund policy
The best way to beat friendly fraud chargebacks is by setting a clear refund policy and making sure that the policy is evident for all to see. In your policy, be sure to state clearly what can be done in the event that a customer is dissatisfied with the service they've received. Also, point out how an item can be returned and how customers can request refunds.
Use 3D secure
You can go a step further with your site/store security details by adding an extra layer of security in the form of 3D secure. By doing this, you'll be shifting liability from yourself to the card issuer or bank. With 3D secure, what you're saying is that your site is safe and secure to transact on, and for a customer to go through with their transaction, they would need to enter a code that can only be available or accessible to the real card owner.
So, if by any chance a customer requests for a refund, then the fault has got to come from the issuer and not your system.
Be rigorous with shipping details
If there would be a delay, inform customers ahead. If you’re delivering a product outside your country, be sure to put a call through to the customer ahead of the delivery. By and large, always make sure that you don’t miss out on any detail when it comes to delivering your products so that you don’t deliver the wrong item to the wrong customer.
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