Chargebacks are a time-wasting problem for online merchants and point of sale systems. What if there was an alternative to chargebacks, one that allowed consumers to overcome the hurdles associated with accepting digital payments? Chargebacks are a common issue for ecommerce sellers. Many different reasons can cause them, but the most common cause is that the buyer has been scammed or has not received their product. This article will help you prevent chargebacks in your store and avoid losing money on chargeback fees. Chargebacks are becoming more of a concern for online businesses. In reality, credit card chargebacks increase at a 20% annual pace. According to statistics, 40% of customers who submit chargebacks do so again within 60 days. And half of those who offer another one within 90 days will do so again. Customers may easily challenge charges on their accounts with banks and credit card firms. This habit is costing ecommerce firms money. Those of you with an online store will understand what I’m talking about. I’m ready to wager you’ve encountered similar circumstances before. To put it mildly, they are a hassle. You thought you accomplished everything correctly on your end. A consumer made an online order. You received payment after completing the purchase. Only afterward do you see that the transaction has been canceled? You were probably not even told of the chargeback until it was too late. So, what’s next? Why are you being penalized for carrying out a request? How far must you go to improve the client experience? In my consulting work, chargebacks have recently become a hot topic. Nobody seems to know what to do with them. That was the impetus for me to write this tutorial. First, I’ll explain what you should do when a chargeback has been submitted. Then I’ll teach you how to avoid it occurring again in the future. At the very least, your chargeback rates will be reduced in the future.
Ways to reduce chargeback rates:
1. Disputing chargebacks is a waste of time.
Everyone I’ve spoken to has the same initial reaction when it comes to chargebacks. Put it to the test. They believe that their ecommerce firm was not at fault and that if they submit a complaint, the matter will be resolved. Regrettably, this is seldom the case. Sure, it seems to be a good strategy in principle. However, even if the shop is not at fault, banks and credit card issuers create the chargeback procedure to protect the customer. I know it’s not what you want to hear, but fighting chargebacks is a waste of time. This is a headache you don’t want to deal with.
As you can see, the vast majority of businesses are contesting chargebacks they believe are fraudulent. What constitutes illegitimacy? According to studies, 80% of customers have filed a chargeback because they didn’t have time to contact a merchant to secure a refund. This is a case of friendly deception. The consumer engages in fraudulent behavior without understanding it. Or maybe they were aware that this was an invalid cause but chose to ignore it. Regardless of the rationale, just 18% of merchants claim to win the bulk of their friendly-fraud chargeback disputes. Banks and credit card firms continue to support customers. What’s the point of all of this? Do not squander your time. Unfortunately, this will be a losing struggle for you in the long term. It’s much better to focus your efforts on preventing chargebacks in the first place. It’s worth challenging a chargeback in some instances, but I’ll get to that later.
2. Orders are delivered on time.
Your consumers are likely claiming chargebacks because their purchases didn’t arrive when they were supposed to. There are a few possible explanations for this. First and foremost, if the product has not come, customers may believe the vendor has duped them. This is particularly true if your company is new and somewhat unknown. That is why, to make your firm look more trustworthy, you must grasp the top aspects that lend credibility to your website. It’s also conceivable that the consumer believes the shipment was stolen or was delivered incorrectly. In any case, if the order isn’t given, the buyer will refuse to pay for it. But what if none of these factors are at play? Perhaps the order is still in transit and has not yet been delivered. The consumer might then begin the chargeback procedure and get their goods a few days later. The harm has already been done. Don’t make a shipment commitment you can’t keep. With Amazon’s two-day free delivery on many goods, anything more than two days seems excessive. As a result, consumers who have signed up for Amazon Prime have greater expectations for free delivery times.
Furthermore, in 2017, 35% of customers indicated they want firms to deliver goods considerably quicker. And that number rose in 2018. People now anticipate speedier delivery in 43% of cases. I believe that number will continue to grow each year. If you can ship items quickly and ensure that they arrive on time, you will lessen the likelihood of chargebacks being issued for this reason. However, delays might occur for a variety of reasons outside your control. For example, winter storms, other natural disasters, or vehicle breakdowns might cause shipment delays. In this instance, you must notify your clients as soon as possible that their orders will be late. Allow them to track the shipment. This should be a typical element of your online store’s workflow. Once an item has been dispatched, you should give the customer an email with the tracking number to monitor it.
3. Keep an eye on your transactions for any signs of fraud.
Don’t take every transaction on your ecommerce platform at face value. Each transaction must be scrutinized for red signs of fraud. I propose building up a fraud metric system to aid you in this process. The settings for this system would be configured to indicate orders that seemed to be suspicious. If you have an unusually significant purchase sent to a different location than the billing address, for example, you may need to request further verification to complete the transaction. Your ecommerce store should demand billing addresses in addition to credit card information. This is referred to as an AVS (address verification system). You’re undoubtedly acquainted with this since I’m sure you’ve had to do it to complete some transactions in your personal life. An AVS prevents a thief with access to a stolen credit card from making a transaction without knowing the card’s zip code. You’ll be out of luck if a cardholder files a chargeback for a purchase made by a credit card thief if you don’t have this extra security step in place. Businesses are witnessing an upsurge in fraud losses in 2018, according to Experian:
Only 40% of company owners are very confident in spot fraudulent behavior. Furthermore, 45 percent of corporate leaders are apprehensive about the possibility of fraud becoming a significant issue. This should come as no surprise. This is because the expense of fraud is rapidly increasing. Fraud costs merchants 2.1 percent of their yearly sales on average. This may not seem to be a large sum at first look, but it adds up quicker than you may imagine. If you make $2 million in sales each year, you’re losing $42,000 to fraud each year. That is, provided you are in the middle of the pack. These figures might be significantly higher if you don’t take precautions to avoid fraud and chargebacks. When expressed in dollars, 2.1 percent does not seem to be insignificant. As shown in the graph above, only 27% of organizations claim they’ve suffered fewer fraud losses in the previous 12 months. To place your ecommerce firm in this category, you must take action.
4. Provide outstanding client service.
As I previously said, consumers may submit chargebacks for wrong reasons, such as requesting a refund. Even if this isn’t the best reason to take that step, the consumer may still benefit. Furthermore, you are unlikely to prevail in a disagreement. To prevent this situation, ensure sure your customer assistance choices are available. Take a step back and consider how your clients may contact you in the event of an issue. If the only alternative is to use a standard contact center, your clients will likely be disappointed and unhappy.
As you can see, 43 percent of customers believe it is difficult to contact customer service representatives. People are preoccupied. They have more important things to do than wait on hold for someone to respond to their issues. It’s quite probable that they’ll be able to challenge charges quickly by using their credit card mobile applications. This is presumably something that can be done with a few clicks. That is why you should use live chat to enhance your client service. Someone may now contact a customer support agent as soon as possible if they have a problem with their purchase or product or if they have a general inquiry. This allows you to provide a solution much more quickly. You want to ensure that your consumers are delighted.
You’ve come to assist them. Make yourself accessible for help via as many avenues as feasible. Keep an eye on the remarks you leave on social media. Surprisingly, companies overlook 79 percent of consumer complaints made online. If your ecommerce firm is among the majority in this instance, it’s unacceptable. That’s a bad example of customer service. Consider a complaint as an opportunity to make things right. If you ignore them, they could file a chargeback against you. It’s also critical to ensure that whatever you’re offering is high quality and not misrepresented. Chargebacks will be lower for high-quality items that match the web description.
5. Notifications and follow-up emails should be sent once a customer has completed a transaction.
When someone makes an online purchase, you should inform them how their transaction will be invoiced. For example, if the name of your ecommerce business does not match the name of your billing statement, explain how the charge will appear on their credit card account. Customers who don’t recognize a description on their credit card account may submit chargebacks without understanding they bought anything from you. Being clear makes it simple to prevent misunderstanding. For example, take a look at this Tropicfeel confirmation email:
The fee will appear on credit card bills, according to the business. A company must make its name known to customers since it’s still creating its reputation. Take your email strategy to the next level. Once the order has been delivered, send a follow-up note. This email will be an excellent chance for you to get feedback from your customers. If anything isn’t working, encourage the consumer to tell you about it. Remind them about your no-hassle return policy. You can now keep ahead of any problems and correct them before the consumer has the opportunity to register a chargeback.
6. Choose a processor that offers excellent merchant assistance.
What method do you use to accept payments for your ecommerce store? If your present arrangement isn’t working for you, you might consider moving to a payment processor that provides helpful merchant services. Unfortunately, the most affordable solution is not necessarily the best. You won’t receive much help this way. Although I previously said that you should not contest chargebacks, it may be required in some cases. If you have a few $100 or $200 chargebacks, it’s better to ignore them. However, if you have tens of thousands of dollars in unauthorized chargebacks from only a few purchases, you should file a dispute. You’ll want to make sure this procedure goes as smoothly as possible under these instances. That’s why I suggest utilizing a payment processor like PayPal or Stripe.
As you can see, using the Stripe dashboard to manage your merchant support settings is simple. All you have to do is upload proof to the site, and it will send everything to the bank on your behalf. Of course, you’ll be charged a dispute fee for this extra service. But I believe it is worthwhile. Good payment processors will make your life a lot simpler in challenging situations. Again, you shouldn’t anticipate a high success rate when resolving conflicts. However, if you want to deal with this procedure yourself, you should hire a processor to do the hard work for you rather than dealing with the banks directly. You will save time and be less stressed as a result of this.
Conclusion
Chargebacks are becoming a common occurrence for online firms. Your business must be prepared to deal with them and prevent them from recurring. It will cost you a lot of money in the long run if you don’t. Most of the time, disputing chargebacks isn’t in your best interest. Most merchants don’t win these conflicts, so choose your battles carefully. It helps establish a solid connection with your payment processor if you wish to go through this procedure. You must give exceptional customer service to prevent chargebacks. Make sure your orders are delivered on time. As many channels as possible, including live chat, should be available for consumers to contact personnel. Keep an eye on your transactions for any signs of fraud. To deter illicit conduct, use an address verification system. Customers should get emails outlining how their purchases will be invoiced once they have completed the checkout process. Then, when the order has been delivered, send another message asking for comments. Your ecommerce company will have an easier time handling and preventing chargebacks in the future if you follow the suggestions in this tutorial. What precautions does your ecommerce business take to avoid chargebacks? Chargebacks are a common issue for ecommerce stores. To prevent chargebacks, you need to have a no chargeback agreement in place. This will help you manage the process and keep your business safe.
Frequently Asked Questions
How do I avoid ecommerce chargeback?
A: Contact the customer and issue a refund.
How do you manage chargebacks?
A: We have a dedicated account manager who handles all chargebacks. You can contact them by opening a dispute case on PayPal or contacting the support team here to know what is happening and make sure it doesn’t happen again.
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