Chargebacks are a serious problem for card-not-present (CNP) merchants and the problem is only getting worse. As U.S. merchants continue to adopt the EMV standard, fraudsters are increasingly shifting their efforts online, where there are more vulnerabilities. Aite group reported in 2015 that credit card fraud had experienced a 100% increase in the U.S. from the seven years before that. The problem is not going away and CNP merchants need to take precautions to prevent chargebacks without inhibiting good sales. The good news is that there are several ways to do this by simply reviewing internal processes and addressing any that may be causing – or aggravating – the chargeback problem:
Be Clear About Refund Policies
Merchants should clearly state their refund policies on their websites and on invoices. This should include product pages, shopping cart review pages and checkout pages. The policy should be clearly articulated and easy to comply with. Many chargeback that occur are “friendly chargebacks”, where the customer attempt to obtain a refund even though they authorized the purchase and received the merchandise or service. This can often be a result of unclear refund policies where the customer considers it easier to dispute the charge than to comply with the process for getting a legitimate refund.
Up Your Customer Service Game
Customer service is one of the most overlooked ways to address high chargeback ratios. Similar to the refund point above, customers often opt to chargeback an online purchase when dealing with an issue they have involves convoluted processes or is unclear. By ensuring that customers can easily resolve issues and are met with helpful customer service staff, many unnecessary chargebacks can be avoided. Double check call center scripts to ensure that staff is equipped to handle all issues that may arise. Employ enough staff to ensure that wait times are reduced to 1-2 minutes. Make sure those responsible for answering customer emails are responding promptly and with enough clear information to address the customers’ concerns.
Update Billing Descriptors
Billing descriptors are the line of information that appears on a customer’s credit card statement next to the charge for your product or service. Many times, a merchant uses their legal name as a billing descriptor, which can confuse customers and lead to chargebacks. Make sure your billing descriptors adequately describe your product, service or business and try to include your phone number. You may also want to include a notice on your invoice that lets the customer know how the charge may appear on their credit card statement.
Monitor and Manually Review Suspicious Orders
Most payment gateways can be set up to flag suspicious transactions for manual review; these may include transactions from IP addresses with a history of fraud, IP addresses that are linked to an excessive number of credit cards, rapid charges made from the same card within a 24 hour period, high-value transactions and accounts with excessive usage. Orders that are flagged can be manually reviewed and an attempt can be made to confirm the transactions over the phone. It’s also important to take action on transactions that are confirmed as fraud after the payment has been processed. In these cases, the merchant should immediately issues a refund and stop fulfillment of the goods or services.
Use Notifications to Prevent Chargebacks
Some service providers offer chargeback notification, which alert a merchant of chargeback activity before the entire chargeback process kicks off. This allows the merchant to refund the customer directly and avoid the chargeback altogether. Chargeback notifications are a great way to augment a chargeback prevention strategy, but should be utilized in combination with the tactics above. Using this system requires the merchant to issue a full refund to avoid the chargeback. Chargeback notifications are also not entirely comprehensive, as they rely on partnerships with issuing banks to obtain the dispute information, and not all issuing banks participate as partners with these solutions providers.
Following the steps above is a great way to get chargebacks under control. All of the steps are related to internal process optimization and can be easily implemented by your internal team or with the help of a payments consultant. What’s more, these fixes don’t require the implementation of numerous tools that can sometimes inhibit perfectly good sales. Go through your checklist and cover your bases and you can dramatically reduce unnecessary chargebacks right away.