Online dating chargebacks are a serious problem. As high-risk merchants, online dating sites work with a large quantity of customers, all using the service for a wide range of reasons. Adding to the complexity of the business model is the fact that chargebacks can occur for a wide variety of reasons as well. In some cases, a customer simply does not recognize the charge on their credit card, due to an unclear billing descriptor. In other cases, the chargeback may occur due to true fraud where someone’s credit card information was compromised and used to make a fraudulent purchase. Regardless of how or why they occur, online dating chargebacks can cause grave harm to a merchant’s reputation, business and bottom line.
What is an online dating chargeback?
A chargeback occurs when a customer disputes a credit or debit card transaction with his or her issuing bank. The problem lies in the chargeback process, which can be slow and arduous and cause complications for a merchant down the road. Since the cardholder initiates a chargeback with their issuing bank the majority of the time, a merchant is often last to find out about the dispute. By then, they may have been fined and penalized by the card brands, incurred fulfillment costs and forced to issue a refund.
Online dating chargebacks are complicated because they can be a result of true fraud or friendly fraud. In the case of the latter, a cardholder may either be confused about the charge or deliberately attempting to defraud the online dating merchant due to a change of heart about the purchase. Either way, it is the cardholder’s word against the merchant. Without the proper protocol in place, online dating merchants can find that they are on the hook for more than they should be.
Online dating chargebacks can throw a merchant’s chargeback ratio out of whack. A chargeback ratio is a chargebacks-to-transactions value that indicates how risky a merchant is. Acceptable chargeback ratios vary, but after the 1 percent threshold, most merchants are labeled “high-risk” by acquiring banks.
Additionally, when online dating chargebacks go above one percent, the card brands often step in and impose monitoring and penalties. For merchants with ongoing chargeback problems, they could be placed on the MATCH list and have their merchant account terminated by their merchant account provider/payment processor.
Why Do Online Dating Chargebacks Happen and How Can They Be Prevented?
Guilty Conscience
Friendly fraud chargebacks are often the result of customers feeling guilty. The Ashley Madison (a dating website that markets itself as an enabler of extramarital affairs) data breach of 2015 exposed the email addresses of members to the public, causing a chaotic public stir and controversy. Sites sprung up to aid spouses in filtering through their data to see if their significant other had been a member of their site. In cases like these, it is not uncommon for members to allege that the account was opened with stolen information and cry fraud to avoid embarrassment or damage to their own reputation. These instances are friendly fraud and cost online dating merchants dearly.
How can I fight it?
Merchants need to do their due diligence, including providing cancellation policies on the website, updating billing descriptors to be straightforward and maintaining and up-to-date privacy policy. Additionally, online dating merchants should email purchase confirmation emails that include a link to terms and conditions.
Dissatisfied Customers
Consumers join online dating sites to find companionship, love, marriage, sex and a slew of other things. There is a dating site for everyone. Unfortunately, signing up for a membership does not guarantee that the user will find any of these things. When online matchmaking sites fail to connect a customer with someone to their liking, customers can become dissatisfied with the service and file a chargeback out of disillusionment. This is another example of friendly fraud.
How can I fight it?
Providing clear terms of use and other conditions on your website can be a way to prevent chargebacks outright or a way to fight them when they happen. Be clear that services are not “guaranteed” and outline the steps a customer can take if they choose to cancel the service. Make it easy for people to cancel. When online dating merchants require customers to jump through hoops to cancel, the customer opts to go directly to their issuing bank and file a chargeback out of ease.
Free Trials
Many online dating sites offer a free trial period of a few weeks or a month to allow users to try out the service and see how the features work. It allows merchants to capture customers who might not be ready to pay for the service and it enables consumers to get their feet wet with a dating service without a long-term commitment. Most also require users to supply their credit card information when they sign up for the free trial, and will automatically charge that card once the free trial period is over.
How can I fight it?
Free trial online dating merchants needs to include clear terms and conditions on their site about how and when a credit card will be charged. Best practice is to send customers an email prior to the end of the free trial to let users know that the charge is upcoming. Clear communication with customers can do wonders when it comes to preventing unnecessary chargebacks.
Online dating chargebacks are a nuisance but they aren’t a certainty. Taking steps to clearly communicate with customers can alleviate a huge part of the chargeback burden. Visit our Q&A section to read more about chargebacks or contact us for a free consultation.