Chargeback disputes: What are merchants doing wrong?
Online selling means that there will be chargeback disputes. Chargebacks provide customer protection and guarantee funds are returned in certain situations. Fraudulent transactions, non-received items, processing problems, and other reasons are common causes of incoming chargeback disputes. It can be difficult for merchants to resolve a chargeback dispute because it involves multiple parties. A single chargeback involves several parties, including the cardholder, merchant, issuing bank, and card scheme. It is clear that things will get complicated at some point.
While chargebacks are usually favored by the cardholder, banks still want to protect their customers. It is worth fighting for certain cases that need to be identified. Although you may not win every case, orders, where you can prove that the cardholder placed an order and received the item/service, are grounds for fighting. Let’s look at the most common mistakes merchants make when dealing with chargebacks.
- AVOIDING ALL FIGHTS
It would be foolish and inefficient to try to resolve every chargeback dispute. However, you will suffer serious losses if your funds are not kept safe by strong evidence that there has been no merchant error. Market research shows that only 17% of chargebacks were actually friendly fraud. However, merchants claim that this number is closer to 32%. This is a good reason to fight back. You will be able to identify chargeback disputes worth fighting for if you establish clear rules. All evidence must be prepared, starting with the order being placed and received by the customer. You can approach the dispute with high expectations of winning by preparing details that show no merchant error.
- OVERLOOKING THE REASON CODES
Keep your team up-to-date on the most recent reason codes for chargebacks. Each chargeback is assigned a reason code. The reason code identifies the type of chargeback and the reasons for the chargeback. It also lists all the evidence required to reverse the chargeback. Merchants can access the resolution protocols of card schemes along with the reason codes to help them understand the issue and what to do in the dispute process.
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- NO COOPERATION WITH YOUR CARD PROCESSOR
You have the same goals, so why not work together with your card processor? They are more familiar with handling chargebacks than you and can offer more insight into how to approach each case. They have the knowledge and experience to reverse a chargeback as well as information about resources available and tools that can be used to fight them.
- MEASURING CHARGEBACKS IN THE WRONG WAY
A chargeback rate greater than 1% indicates fraudulent activity on your site. Following this, banks will flag you as a high risk merchant. Your win/loss ratio is another important indicator that will help you determine the next steps. Low rates indicate ineffectiveness in fighting chargebacks. You should look into changing your approach, either in terms of resources or in the direction of the team.
- CUSTOMER COMMUNICATION IS BAD
There are many reasons customers file chargebacks. In some cases, confusion due to poor communication can be the root cause of chargebacks. You can reduce chargebacks by ensuring that customers recognize the transaction in their statements, are not misled or confused by product descriptions, and understand the order process after placing an order.
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- COLLECTING NO EVIDENCE
You should have a database that contains all steps in order from the order placement through to delivery. It makes it easier for you and your team members to show that everything is in order.
- THERE IS NO ‘CHARGEBACK FLOW’
Spend time developing a chargeback flow. It is important to clearly state the steps required for approaching a case. This includes detecting a possible win in chargebacks and then resolving chargeback disputes.
- AVOIDING FRAUD PREVENTION SOLUTIONS
Investing in fraud prevention solutions allows you to focus on your core business, frees your chargeback team of manual analysis, and protects your business as well as your customers. Prevention is always better than cure.
It is clear that disputing a chargeback can be a complicated and time-consuming process, which might not prove to be a success. If you don’t fight, your reputation and revenue might be affected. Make sure to create a chargeback flow before you give up and avoid the aforementioned practices. Contact Chargeback Expertz our team can assist you in implementing your fraud prevention strategy.