Pleasing today’s online customer is not easy. A huge portion of today’s buyer comprises millennials who have been branded disloyal. You will spend lots of time and money coming up with unique marketing strategies to get them to buy your products and come back for more.
The last thing you would want after investing your resources to make a sale is to start counting your chargeback losses.
What is Chargeback Fraud?
A chargeback is a situation whereby a customer requests a refund of their funds after receiving a good or service.
The reasons for a chargeback can range from legit to fraudulent. Legit reasons for chargebacks include charges on canceled subscriptions and delivery of wrong or poor quality goods.
Customers can also make fraudulent chargebacks. Many merchants have created return policies as a strategy to increase sales, foster loyalty, and increase trust among customers. Unfortunately, some buyers have taken advantage of the opportunity to commit chargeback fraud.
Do not let your return policies be the reason why you encounter losses. With retail fraud 3rd degree solutions, you can prevent chargeback fraud before it eats into your business.
Two Common Types of Fraudulent Chargebacks
- Card not present (CNP) fraud
CNP fraud is now one of the topmost reasons for chargeback fraud. It is 81% more likely to take place than card-present fraud. This kind of fraud mostly takes place when hackers use stolen card information to make purchases.
- Friendly fraud
Unlike the name, friendly fraud is anything but friendly. It is where a customer makes false claims about the product. For example, they can report they did not receive the ordered goods. They can also lie about the actual product not matching what they saw online.
A customer can also claim that they did not order products and that their credit card must have been compromised.
The True Cost of Chargebacks
As a merchant, you must stop seeing chargeback fraud as a cost of doing business. You need to deal with it like the toxic element that it is.
You see, chargebacks do not just cost you sales and goods. You will also incur:
- The cost of restocking
- Payment processing fees
- Operational costs of processing an order
- Marketing costs
- Chargeback fees by your bank
In the end, you end up losing more than the cost of the charge-backed item. If you are dealing with several chargebacks, think about what that would do for your business. That is why you should avoid chargebacks at all costs.
However, sometimes you could find yourself amid a chargeback dispute.
If you are in such a situation and you know that you met all your obligations to the buyer, here are 5 things you can do to increase your chances of winning the case:
1. Jump in quickly before your grace period is over
As soon as you are notified of chargeback that you think is not legit, address it as soon as you can. Prepare your documentation evidence way ahead of time before your response period elapses. Some card merchants may charge you for failure to give a response.
2. Know the measures that are in place to protect you
Protective measures are designed to give you time to deal with and investigate the issue at hand.
First, there is the reason code where you can find information on why the buyer filed a dispute. Each card network has its record code system. You need to study these to argue effectively. Secondly, for late deliveries, customers must not do chargebacks before attempting to return the item.
Thirdly, the issuer cannot file a chargeback fee before the lapse of 15 days after a customer return. This gives time for the merchant to try and sort the problem out with the customer.
These are just some of the few of your rights that you should know.
3. Do a chargeback representment
If you have done your investigation and do not agree with the claims of the buyer, you have the right to refute the chargeback. In this case, you need to present compelling documentation to prove that you served the customer as agreed.
Primarily, compelling evidence should base on your findings from the reason code.
You can provide a rebuttal letter that outlines your case, evidence of carrying out due diligence to ensure correct order processing, and a copy of your terms and conditions.
If the customer has successfully ordered similar goods in the past, include that as well as records of communication.
You can prevent fraudulent chargebacks by using retail fraud solutions. Other genuine cases can be prevented by the use of a responsive customer service department.
Sometimes, when you cannot avoid a chargeback case, you need to fight to get justice done. That requires you to know your rights and be armed with the right documentation so that you can give prompt chargeback responses.
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