Introduction
Chargebacks still remain a bigger concern for any business. It tarnishes the hard-earned reputation of the merchant. Chargebacks are triggered when a buyer disagrees to a transaction and raises a dispute with the card issuing bank. A chargeback makes the bank to reverse the transaction, causing financial losses to the merchant, the card issuer may blacklist the merchant and the merchant may get charged with hefty fines. Today, we talk about how merchants deal with chargebacks, how they guard their businesses and how they gain customer confidence.
What are Chargebacks?
Chargebacks are disputes initiated by customers to get a refund for a transaction done through card. Customers trigger chargebacks when they are unhappy with a purchase and fail to receive a proper customer service from the merchant. Chargebacks can be legitimate, and it can be fraudulent as well. Certain customers trigger a chargeback for valid reasons such as unauthorized transaction, non-delivery of goods, mismatch in order total, goods received being unworthy, bad customer service experience etc. Whilst some fraudulent users can falsely claim non-delivery of goods and latter trigger a dispute with the card issuer to get a refund.
Tackling Chargebacks
Chargebacks can be tackled to a very large extent. Merchants implement new ways to appease customers and to reduce any chances of a chargeback. Below are few of the ways used by retailers to prevent chargebacks:
Better Customer Service Experience: Merchants work on their customer support service to provide a streamlined service. The Customer Service should be made available to address any customer grievances and prevent the customers from escalating the need for chargebacks. The customer service team should be trained to ensure to resolve customer problems diligently and in the first instance itself to avoid potential chargebacks later. The customer service team members are trained periodically, and they establish a procedure to review the customer service rules and regulations at periodic intervals.
Clarity on Policies and updated: All polices related to returns, refund, exchange, cancellation etc., should be kept clear and crisp. The policies should be regularly reviewed and updated. The customers should be made aware of the polices in advance before placing an order. The website provides consent checkboxes for customers to ensure they understands all the policies and amends to them before placing the order. These consents are then recorded along with the customer data and the order for further review and analysis.
Secure Payment Processing: Merchants tend to go with a secure payment gateway adhering to the secure standards laid down by PCI-DSS. Payment Gateways using advanced integration modes, complying with industry standards, adhering to the highest standards provided by PCI-DSS, and providing efficient encryption algorithms are preferred. Enabling 3D Secure (3DS or 3DS2) provides an extra layer of security and prevent fraudulent transactions.
Enhanced Fraud Detecting System: An enhanced Fraud Detecting System is required to track any fraudulent transactions, suspicious customer behavioral activities etc. Orders made using declined cards, simultaneous bulk orders, multiple transaction from a specific IP location etc., should be flagged and scrutinized before allowing them to pass through.
Precise Product Information: Product Information, Product Specification, Product Classification of Attributes and Values, Thumbnails, Images etc., shown on the website for a product should be latest and accurate. Ambiguous information about a product can lead to chargeback, this occurs when the product received doesn’t match to the user expectation and they don’t comply with the product information given on the website.
User Address Validation : The Address Validation Service should be used which is provided by Payment Gateway or the Fraud detecting system to validate the authenticity of the customer provided shipping and billing address. Any discrepancy seen with the customer provided billing address on the website and the billing address associated with card at the card issuing bank should be flagged and the order should be reviewed and approved or rejected based on the consensus provided by validation service
Implement an Easy and Clear Return, Refund and Cancellation Policies: An easy and clearly written Return, Refund and Cancellation policies allows customers to adhere to the path of Return, Refund or Cancellation policies set by the merchant whenever they are un-happy with an order. This avoids triggering chargebacks.
Know Your Customer (KYC) Verification: Implement KYC rules to verify a customer during the website customer registration process. Genuine customers successfully completing the KYC verifying should be allowed to register and place orders.
IP Geolocation and Device Tracking: IP Geolocation allows the system to track the physical location of the customer and Device Tracking helps to track the unique features of a device. These features help to track, scrutinize, and block devices and IP’s creating multiple fraudulent bulk orders, usage of declined cards, triggering multiple transactions, a system using multiple accounts to place an order etc.
Deployment of latest updates for Software’s and Security infrastructure : Keep application software, system software, firewalls, certificates, antivirus, payment gateway, fraud detection system etc., updated with the latest patch at periodic intervals. This keeps the business secure and protects from any fraudulent activities occurring from an outdated software or security infrastructure.
Multi Factor Authentication (MFA) during customer Login: Enable MFA during customer login to allow valid customers to login to the application and place orders. This will block fraudsters from login and placing orders whenever genuine customers credentials are compromised.
Conclusion
Chargebacks are a potential threat to business. By implementing effective measures, the business can safeguarded themselves from potential chargebacks. In this digital age, effective and proactive measures protect the business from frauds and threats, maintain customer trust and loyalty, protects the business from any financial obligation, helps in long run and provide long term success.
