What are chargebacks from a perspective of American law and business? By this concept, we mean such a form of consumer protection in which a monetary transaction is canceled due to a person’s statement challenging the withdrawal of money for a product or service as a result of payment using a credit or debit card.
Business Hack 1. Write a Clear Return and Refund Policy
81% of consumers who initiate a chargeback do it for convenience reasons. That is why any business, whether an enterprise software industry representative or a small souvenir seller on a Florida beach, needs to explain its refund or return policies to customers clearly. It will significantly reduce the chargeback level.
Business hack 2. Communicate with Customers before They Refund Payments
The level of a chargeback is 0.03% – 0.66% in different areas. Most of it is in the enterprise software industry and least in the HoReCa field (hotels – restaurants – casinos). This situation can be explained by the fact that the client can always communicate with the manager in person in the latter case. And a business representative will be able to do everything to avoid a chargeback. For example, he or she will make a gift or carry out a partial or full refund. And this is always better than a chargeback.
Business Hack 3. Indicate the Correct Descriptor
The regulation that governs fair billing entitles customers to chargebacks, “defending credit card protection against inaccurate and unfair use of credit cards.” That is why make sure everything is ok with your descriptor. Re-check that it includes a working phone number so that clients have a chance to contact you first before they call their bank. If you do business under more than one name, write the company name on the merchant descriptor that matches the name of your online storefront. And point your merchant descriptor clearly to your customers. Do not forget that business losses on each chargeback transaction can be up to 250% due to commissions, penalties, and fines.
Chargeback is not a problem if you have a reliable Credit Card Processor
Business hack 4. Completely Understand the Codes
American businesspeople lost 4.4% of all revenue in 2019 due to chargebacks. This figure has significantly worsened their financial performance. It is another reason to do everything to reduce the level of chargebacks. For example, study all the codes, which, by the way, changed again in 2021. Ensure you have up-to-date code documentation for each of your credit card issuers. They will provide all the necessary information about the chargeback, including the reason, timing, required evidence, and other details.
Business hack 5. Collect Big Data about Customers
Chargeback volumes in the United States are growing by 20% annually. You can reduce the risk of this negative trend to your business by regularly collecting and analyzing big data. Monitoring will allow you not just to understand the reasons for chargebacks but also to take preventive measures:
- Always scrupulously make copies of your information.
- Do not delete correspondence with counterparties by mail or chats.
- Keep contracts, purchase orders, shipping confirmations, sales orders, invoices, receipts, and other transaction records neatly.
When challenging a chargeback in court, this habit can come in handy.
Business hack 6. Eliminate Operational Problems
Chargeback management consumes 13% – 20% of the operational budget, and 58% of digital goods merchants believe it’s necessary, but 53% said that level of commitment takes away funding from other revenue-generating projects and departments. For this reason, ongoing staff training is required to reduce customer dissatisfaction. When your staff member can understand payment processor compliance protocol, she or he will be better prepared to spot suspicious activity as it is happening. Regularly train your squad on compliance to better identify risk when they see it. Also, we advise checking chargeback notifications to learn quickly when a customer is disputing a charge.
Business hack 7. Create Anti-Fraud Policies
According to statistics, about 30% of chargebacks are fraudulent because transactions without presenting a plastic card are growing. At the same time, the police are traditionally weak in investigating small financial scams. In this context, triple authentication is needed. Also, please use 3D Secure technology created by Visa and Mastercard to help with decreasing the number of scams. We advise you to invest in different fraud protection technologies that can seriously reduce your risk of disputes stemming from fraud overall. We counsel checking chargeback notifications to learn quickly when a customer is disputing a charge. One more thing, If a card is declined, avoid trying to run it multiple times. It could result in duplicate transactions and, as a result, duplicate chargebacks later. Instead, ask for another method of payment.
Business hack 8. Be Honest about Your Products and Services
4% of chargebacks happen since customers disagree with the description of the received product on the site. Therefore, everything is simple: just write honest descriptions of your product or service while using as precise details as possible. It is imperative in online trading.
Business Hack 9. Focus on Priority Chargebacks Only
Sellers win only 56% of disputes after chargebacks. Therefore, carefully choose which transactions you will dispute and which you will leave as is. After all, no business can 100% avoid a chargeback. Moreover, each case consumes time, energy, and other resources to spend on something more useful. At the same time, doing nothing is worse than at least something.
Credit Card Processing helps with chargebacks issues
Business Hack 10. Contact an Analyst for Subcontracting
US “Friendly fraud” is expected to exceed $ 130 billion in losses compared to 2020. That is why it makes sense to manage the chargeback threat to involve third-party professionals, as well as special software. It will allow you to spend the finances of your business more efficiently. After all, chargebacks relate to businesses of any type and size.
