How to Fight Chargebacks as a Merchant
Whether you just opened the doors to your first startup or you have 20 locations across the country, business owners run into many of the same problems. One of the most hassling, though, is having to fight chargebacks.
A chargeback occurs when a customer disputes a charge and asks their financial institution to take money back from you. This could result in both the loss of the sale price and the product/service in question. Fortunately, there are some ways you can fight chargebacks as a merchant.
Fight Chargebacks Proactively
Chargeback fraud is becoming more and more prevalent, which means it’s more important than ever before to protect yourself. Whether it’s simply a customer who regrets their purchase decision or a legitimately fraudulent individual, the costs and hassle of a chargeback remain the same.
As you would expect, the best way to fight chargebacks is to prevent them from occurring at all. To do so, we recommend you use risk-based authentication rules to automate your online payments. By partnering with IntegraPay, you’ll be able to protect your business with a variety of unique fraud monitoring rules. Not only will you gain access to detailed reporting on approved and declined transactions, but you’ll also be able to use industry leading protocols like 3D Secure.
Using what’s called a three domain model, 3D Secure preemptively authorizes a transaction with the issuing bank. This effectively ties a password/code to a customers card, validating their identity. If a chargeback still occurs, the burden is instead placed on the issuing bank, as they approved the transaction.
Respond Quickly and Efficiently
The fortunate part about customer-initiated chargebacks is that you can dispute the claims. In most cases, though, there are pretty strict deadlines attached. If you fail to meet any of these deadlines, you’ll join the more than one-third of merchants who lose over 70 percent of chargeback disputes.
So, if you don’t want to become a statistic, acting quickly may help you avoid additional costs altogether. Once a customers initiates a chargeback, there’s a small window of time where you can lodge a dispute and deny the customer claims. In circumstances where you have been the victim of chargeback fraud, a paper trail is paramount to winning your case. If there’s been a legitimate misunderstanding however, we suggest you try and rectify this with the customer privately. If you’re able to reach a solution (be it a refund or otherwise), you can kindly ask them to reverse the chargeback to avoid costly fees from the issuing bank.
Unfortunately, there is a ton of red tape involved in disputing a chargeback. This means whether you’re fighting it or coming to an agreement with the customer, getting started quickly is essential.
Provide Substantial Evidence against the Chargeback Code
When you’re disputing a chargeback, it’s important to take note of what’s called a “reason code.” This numerical code will tell you the exact cause a customer is claiming in their chargeback request. It’s this reason code that you’ll need to compile evidence against.
Is someone disputing their recurring credit card billing? Find the contract they signed when agreeing to it. Are they claiming they never received their item? Find the tracking code complete with delivery notification. You don’t have to reinvent the wheel in this process – just prove that the claims are fraudulent or untrue.
When you decided to go into business for yourself, having to fight chargebacks likely wasn’t one of the headaches you expected. Unfortunately, it’s very unlikely that you’ll never have to deal with this issue. If you remain proactive and always keep good paperwork, though, you’ll increase your chances of avoiding the negative repercussions that come with these disputes.