7 Mistakes Costing Your Online Business Chargebacks

A recent Javelin study reports that fraud and chargeback management consumes between 13 and 20 percent of a business’ operational budget.  Since EMV was implemented at retail locations, online merchants have been hit with increasing fraud attempts. Fraud is a huge expense that consumes inventory, increases overhead costs and accrues hefty bank fees.  However, there are a few key areas that merchants can focus on to protect their business from chargebacks. Most online retailers make at least one of these seven mistakes that are costing them chargebacks:

Mistake #1: Maintaining unclear transaction records
Customers that dispute transactions with their credit card issuer are referring to a specific purchase at a given moment. By keeping clear records of customer purchases, signatures and invoice items, a business has the first step of their chargeback defense.

Mistake #2: Delaying chargeback response times
Merchants receive notice about chargebacks in the mail, and they must be responded to in a timely manner for their defense to be valid and accepted by the banks.  A merchant will usually have about ten days to respond to a request with proof that the transaction occurred. Failure to respond or a late response allows the chargeback to go through.

Mistake #3: Not understanding payment gateway settings
Customers depend on businesses to keep their credit card information safe, especially in the online environment. By providing customers with a secure payment form, it will establish a level of trust with your clients and provide a level of protection against fraud and chargebacks.  Most gateways come with built-in security settings, such as requiring cardholders to enter their CVV security code or checking that the billing address zip code matches the address linked to the card. Merchants should contact their gateway to see which options are available to them to increase online transaction security.

Mistake #4: Being unrecognizable on customer statements
Customers may remember that they purchased items from your business, but if they cannot recognize your company name on their statements, then they will dispute the charge.  Merchants can speak to their credit card processors to ensure that their DBA, which is the name that customers recognize, appear on customers’ statements.

Mistake #5: Satisficing with customer service
Customers are encouraged to approach merchants first before turning to banks to dispute charges. Businesses can then make adjustments or work to meet their customers’ needs and expectations directly. However, companies that don’t make customer support a paramount value force customers to contact their banks about issues that arise, resulting in higher chargeback rates.

Mistake #6: Remaining ignorant about chargebacks
Merchants should maintain a basic knowledge of chargeback codes. These codes explain the reason why customers have disputed the purchase, and understanding them is key to a successful defense.

Mistake #7: Thinking a secure cart is enough to prevent fraud
Fraudsters are getting smarter by the day, and a seemingly innocent transaction may cost a merchant down the line. By employing a robust fraud detection software like Fraudwatch, a merchant can protect themselves with an in-cart transaction scanner that runs each submission through dozens of checks before providing a simple yes/no answer. Better yet, each approved offer is guaranteed.

Fidelity’s 21 years of industry experience has made us an expert in fraud and chargebacks. For top-notch chargeback assistance and recommendations, feel free to reach out to us today.