Use chargeback alert networks
Merchants who enroll in chargeback alert networks are able to reduce their chargeback issuance rate by about 40%. When a cardholder disputes a transaction, the merchant will receive an alert. This enables the merchant to refund the customer before a chargeback is finalized. Alerts help prevent chargebacks, keep chargeback ratios low, and avoid chargeback fees.
Address Data Security
Protecting cardholder data is essential; both the customers and the Payment Card Industry expect it. Keeping information safe goes one step further, though; it helps prevent fraud-related chargebacks.
Maintain PCI-DSS compliance
The Payment Card Industry Data Security Standard is a framework designed to safeguard cardholders’ personal information and facilitate consistent data security measures globally. PCI-DSS helps protect sensitive information while it is being stored, processed, and in transit. Merchants need to ensure their business is PCI-DSS compliant. While adhering to the PCI-DSS standards is both time-consuming and expensive, the benefits of compliance far outweigh any drawbacks.
Check your billing descriptors
A customer might accidentally engage in friendly fraud just because the billing descriptor isn’t easily recognized. When consumers look at their credit card statements, will they be able to easily identify your business by the name that’s listed?
Get professional help
Implementing these DIY prevention tips will reduce certain types of chargebacks. DIY efforts are usually able to successfully address the “low-hanging fruit,” the easily preventable chargebacks caused by obvious mistakes and mismanagement. However, most types of chargebacks are only minimized with intensive management efforts that surpass DIY tactics. Rather than spend the resources to try educating an in-house chargeback specialist, it is far more efficient to outsource the task.
Verify the phone number and transaction information.
Prior to shipping your products, call the phone number provided by the customer and verify the transaction information. Criminals may be unable to verify such information because in their haste to max out the credit line before the fraud is discovered, they often order at random and do not keep records.
Examine priority shipment requests.
Costly priority shipments may indicate a fraudulent transaction, especially if a free shipping option has been ignored. Unlike the rest of us, criminals do not much care about shipping costs.
Validate orders from repeat customers that differ from the established pattern.
If an order from a past customer deviates from the established pattern, contact the customer and validate the transaction.
Clearly describe your product or service.
As a merchant, make sure you give clear descriptions of your products and service policies so that liabilities fall upon the consumer in regard to dissatisfied purchases.
Have an easy refund policy.
If a consumer is truly unhappy with their purchase, have an easy return policy so the consumer does not feel the need to initiate a chargeback with their provider.
Provide your company contact info.
Card processing errors can easily be fixed by providing consumers with your contact information, whether on the receipt or on your website, so they can contact you directly and have the error fixed without initiating a chargeback.
Optimize your billing descriptor.
Often times chargebacks can be a matter of misunderstanding, specifically because the consumer is unclear about the transaction details that appear on their credit card statement. Be sure to let the consumer know what business name will appear on their statement. If they cannot recognize the name of your business because of a DBA, the consumer may begin the chargeback process.
Keep clean records.
Of course, there are those bad people out there filing fraudulent chargebacks in hopes of getting free stuff. Every year merchants lose billions of dollars to lost merchandise on top of transaction reversals and chargeback fees, all caused by criminal consumers who purchase items and then claim they never did. On many occasions, these cases are lost by the merchant for lack of providing simple and clean records.
Additionally, make sure your sales receipts are complete and legible so that they can be clearly understood by the consumer, as well as a valid piece of proof during a chargeback dispute. A clean receipt should be the first step in fighting a chargeback.
The statute of limitations for issuing chargebacks varies from provider to provider, however, it can be anywhere from 180 days to 3 years following a transaction. Thus it’s recommended merchants retain their receipts and records in an organized fashion, so they are able to thriftily and accurately provide information upon request.
Set shipping expectations.
Often a consumer will issue a chargeback when they pay for an item but have yet to receive it. As a merchant, make sure all merchandise has shipped before depositing a sales receipt. If a customer doesn’t have an item but sees it on their credit card statement, then they may want to issue a chargeback.
On the same note, let them know about the expected shipping time and delays in delivery. A chargeback for “services not provided/merchandise not received” can smoothly be corrected with shipping details, carrier confirmation, and evidence of delivery such as a signed delivery receipt (often referred to as a POD, or “proof of delivery”). Or, if the shipping time frame has not yet been surpassed, and you have clearly stated on your website or cash register “please allow X amount of days for shipping,” presenting that information to the investigating bank can stop the chargeback.
The same can be said in a reverse situation, in which the consumer claims they returned the items but never received a credit. In this case, let your merchant bank know that you haven’t received the returned merchandise, or the services have not been canceled by the cardholder.
Be quick to respond.
Responding quickly to chargebacks is a merchant’s greatest tool, as there is a certain time limit in each step of the chargeback cycle, and a delayed reaction can result in a chargeback loss. In this way, consumer misunderstandings can easily be resolved as well; so if a customer says they never received credit for a return, as the merchant you can quickly provide proof of the specific day the credit was issued and nip the situation in the bud before it manifests into an all-out chargeback war.
Pick your battles.
As a merchant it’s also important to know when to pick your battles. It may be cheaper and easier to let certain chargebacks go if you know you cannot win them, saving yourself the useless time and expense of fighting.
E-commerce merchants looking to reduce fraud will benefit most from a holistic approach that includes multiple solutions such as:
- 3D secure
- Rules-based filters
- CVV2 Verification - By requesting the three-digit code as part of the CNP process, merchants can be sure that the person placing the order has the card in his or her possession, adding another layer of security
- AVS Authentication - Utilizing AVS allows merchants to verify the cardholder’s billing address with the data on file with the issuing bank.
- Digital fingerprinting
- Shared device reputation
- Proxy databases
- E-commerce account issuance
- Customer validation
- Identity verification
- Knowledge-based authentication
- 3D secure
- Email verification
- Social media validation
Cost of Over Protection
When fraud-scoring tools are too sensitive, the result is an unnecessary amount of false positives. These false positives can result in card declines and cause significant sales losses, blocked accounts and an overall poor customer experience.