“Chargeback management”– a term merchants around the world dread. But, chargebacks are a fact of life and can arise for many reasons, many of which are out of the merchant’s control.  Examples of chargeback triggers include:

  1. Fraud
  2. Customer disputes
  3. Processing errors (e.g. duplicate transactions)
  4. Authorization issues (e.g. debiting cardholder)

One particular challenge for merchants lies in how to find a balance between preventing fraud-related chargebacks without discouraging legitimate consumers from buying on their website.

According to a recent CyberSource Fraud Report, chargebacks are a key, if not the key, indicator in managing fraud. The majority of survey respondents pinpointed chargeback rates as the most important KPI for fraud management, followed by other types of fraud rates:

  • Chargeback rate (62 percent)
  • Fraud rate by value (47 percent)
  • Confirmed fraud rate (35 percent)
  • Fraud rate by order volume (27 percent)

While it is unrealistic for merchants to think they can completely avoid chargebacks, they can feel empowered by the knowledge that there are clear measures they can take to better manage, and ultimately reduce, the number of chargebacks and their negative impact, including financial damage to their business.

Here are several tips that will help merchantsto better manage their chargebacks:

1.   Identify reason code: First and foremost, it is crucial to monitor chargebacks according to reason code (as listed above), to pinpoint the cause of the problem.

2.   Know Your Customer:  Yes, merchants continue to hear ad nauseum about the importance of KYC, but I can’t reiterate the point enough. They must continue to take this extremely seriously, and not rely solely on their acquirer or PSP to protect them from fraudulent customers. The more proactive merchants are, the easier it will be to avoid having to be reactive when something goes wrong.  If something feels ‘off’ with a customer, it is important for them to follow their gut feeling and react accordingly.

3.  Be proactive to prevent chargebacks: Prevention is the best form of defence. There are many things a merchant can proactively do: offer clear product descriptors, provide a customer service number, email consistent and accurate notifications to customers and generally maintain good customer dialogue.

4.  Provide excellent customer service: Be informative and transparent regarding pricing, promotions, subscriptions, refunds, cancellation and shipping policies. Merchants should follow best practices, including processing and shipping orders before completing the transaction, tracking and recording shipping and/or service delivery, and lastbut not least, communicating clearly and promptly with customers regarding any questions or concernsthey have.

5Employ security measures: Merchants must implement advanced security measures. There are several options, such as implementing 3-D Secure or an Address Verification System (AVS) to protect against chargebacks. It is best practice to both perform fraud checks on cardholders before processing orders and to check end-consumer behavioural patterns.

6.  Do not automatically issue a refund if you receivea chargeback: Pick your battles, but do fight back if you have compelling evidence, such as written communications or receipts, that support your case.

7.  Work with the right provider (PSP or acquirer): If you have received a chargeback that you believe should be represented, you should expect proactive consultative support from your provider.

A good provider should:

  • Handle and represent your chargebacks
  • Work with you on the chargeback presentment results/count and improve stats
  • Pinpoint chargebacks due to technical reasons, and represent them automatically

This is just a brief overview of the issues involved in chargebacks. Credorax representatives are available 24/7 to explain in more detail about our chargeback management and representation services – simply contact us at grow@credorax.com.