Any business is obliged to provide its customers with the opportunity to return money if they are not satisfied with goods or services provided. Unfortunately, more and more often, scammers use it to deceive merchants. In order not to expose your brand to risks due to malevolent activities, you should think about chargeback fraud prevention.
Why Chargebacks Are Dangerous
Chargebacks are an essential tool to protect customer rights. Clients may request a refund for the following reasons:
- A payment was made by mistake;
- A product or service was not delivered;
- An item has defects;
- A client has never made a purchase;
- A product did not fit a buyer.
While these reasons are great for a real buyer to demand a refund, they can also be used by scammers to obtain money and, sometimes, goods. Thus, you, as a merchant, are at a loss. Moreover, if the percentage of chargebacks exceeds the established rate (usually about 1%), your account might be frozen or even closed.
How to Prevent Chargebacks
Most often, issuing banks resolve disputes in favor of customers. Therefore, preventive measures should be taken to protect your business from scammers who can use this opportunity for their own purposes. They will also help reduce the overall number of unhappy customers who issue chargebacks and, consequently, reduce your payment processing feesand increase turnover..
1. Quality customer support
Often, buyers who are dissatisfied with the product contact the seller directly rather than initiating a chargeback procedure. You have the chance to find out what exactly went wrong, what a client was unhappy with, and, depending on the situation, offer a refund or exchange of goods.
2. Clear returns policy
Write a document where you transparently describe the parties’ rights and obligations and outline the cases when a client can request a chargeback. Also, include a detailed explanation of this process.
3. Competent description of goods/services
Suppose each of your products has a full description that includes all the functionality, characteristics, and dimensions. In that case, it reduces the likelihood that a buyer will order the wrong product or be unhappy with it. Add photos or videos of items for better reference.
4. Secure payment process
For your part, you need to ensure the maximum security of transactions and the safety of your customers’ financial information. You should only contact trusted service providers, use reliable payment gateways, and apply modern solutions like 3D Secure, device fingerprinting, and KYC to help identify fraudsters at the initial stage.
5. Disputing claims
As a merchant, you have the right to dispute chargeback requests, especially if they seem suspicious or unfounded to you. The list of required documents and terms might vary in different situations. That is why it is recommended to keep all receipts, documents, and correspondence with clients for several years.
Preventive Measures Are Key to Your Prosperity
All of the above methods are great to reduce chargebacks and minimize the risk of fraudulent activities. Experts recommend using multiple solutions so that scammers are less likely to find loopholes. You cannot 100% protect your business from chargebacks, but you can effectively lower their percentage.
