Chargebacks, possibly one of the most frustrating parts of running a business.
Our last article, “9 Insider Tips To Prevent Chargebacks”, addressed several proactive steps businesses can take to reduce the incidence of chargebacks. We think every business should implement these practices. Not just to lower chargebacks. Businesses can also help thwart fraudsters, deter “friendly fraud”, and provide better customer service.
But let's face it, no matter how hard you try, you're going to get chargebacks. And certain businesses are just prone to chargebacks more than others. Considering the negative effects, it behooves merchants to learn when and how to fight a chargeback filing.
Fight chargeback filings to deter “friendly fraud”.
There’s definitely a time to fight, and a time to stand down. First of all, if a purchase was completed with a stolen card, then you have to give the money back to the rightful cardholder. This is why it's so important to beef up fraud detection strategies so the transactions don’t go through in the first place. But nothing is perfect, and about 30% of chargebacks are due to true fraud - stolen credit card information.
The type of chargebacks you can fight are due to “friendly fraud”. They are usually legitimate purchases where the customer seeks a refund because they’re not happy with the product, or it was defective, or they have buyer's remorse.
The chargeback filing feature is made very simple for cardholders and sways towards the cardholder. In fact, the process is getting easier for consumers who want to file for a chargeback. Before, a customer had to call their card issuing bank and speak to a customer service representative to file a chargeback. They had to explain why they are filing for a chargeback.
Now, many banks are allowing customers to quickly file through online forms or within their mobile app. This greatly reduces friction for the consumer. They don't have to talk to a person, there's no reason to second guess making the chargeback filing.
The easier it is to file a chargeback, the less likely some customers are to try to deal with the merchant first.
Merchants must present compelling evidence that proves that the transaction that’s being disputed is actually a valid charge if they want to win a filing.
Friendly fraud chargebacks are actually a form of fraud. It's just that it is not necessarily intentional. 81% of consumers filed a chargeback because it was more convenient. They felt like it was just quicker and they didn't have time to contact the merchant.
With this form of chargeback, if you can prove the purchase was legitimate, it's worth fighting the filing.
Effective chargeback rebuttal requires being prepared.
Your first line of defense is going to be thorough and organized record keeping.
While cardholders can file a chargeback up to 180 days after a charge, merchants only have 30 days to respond. Given the short amount of time you get, it's very important to be on top of filing notifications as soon as you get them. You better have your you-know-what together!
Organized transaction records will not only help you respond to the bank quickly, they’ll provide you with all the data you need to address the issue with the customer. (This is the first thing you're going to do!) And having quick access to complete purchase data will make it easier to respond in a timely manner. Having everything you need will help to reduce the frustration of a complicated process.
In order to have a strategic plan for fighting chargebacks, you must set the foundation up properly.
First, you need to have a clear understanding of what type of evidence the card network will expect you to produce. Each card issuing bank may have slightly varying requirements for evidence. In addition, different business types will need to keep varying types of data as evidence.
For instance, an online digital product or service company will have to keep more and different transaction data than, say, an online T-shirt store. Because their product is digital, they will need a way to prove it was delivered and that the consumer downloaded and/or opened and used it. The T-shirt shop only needs the delivery services proof of delivery.
Each business should determine the types of data and receipts that should be kept to best protect their business.
Every time a customer files a chargeback, it is assigned a “reason code” for what the problem is, or why it is being filed.
You will also need to understand the reason codes for the chargeback. Or at least have a list of reason codes so you can look it up quickly.
What type of evidence will help fight a chargeback?
The card issuing banks will want items that prove this particular customer came to your site, made a purchase, and received the product. This is not as hard as it seems, since your payment gateway has much of this capability built in. It can capture IP addresses to show where the purchase originated from. Security measures utilize address verification services (AVS) and CVV to match the information with data on file with the card brand.
You may be able to implement IP tracking within your website. IP tracking will show the customer’s journey through the website, including pages visited, time on each page, continuing to the cart and checkout page.
Make sure to require delivery confirmation whenever sending physical products. This confirmation will include the date and time the item was delivered by the third party. These days that can even include an image of where the item was left at the customer’s residence. It's much harder for a consumer to say they never received an item when you have proof it was left on their porch.
Digital goods require a bit more data capture. A digital receipt will show that you delivered the goods to the consumer (usually an email). It will also capture data showing the customer logged in and/or downloaded the goods to their device and opened or viewed the goods or service.
Consider the use of a robust chargeback management software program.
If you're subject to excessive chargebacks, you may want to invest in help from a robust chargeback management program.
Often merchants can get early notification of a chargeback filing. This gives you a chance to contact the cardholder directly to address the issue and come to a resolution before it becomes recorded.
Chargeback management software automates the sharing of information with the card brand. Detailed transaction information is shared automatically with the card networks. For each transaction they receive detailed information about the company, the customer, the products purchased and the transaction.
This way when a customer begins a chargeback filing, the customer service representative has access to most of the pertinent information right away. This can help them determine if it's legitimate or if they need additional information.
So You Got a Chargeback - Now What?
Well, we know you're prepared. You’ve collected all the pertinent information you could to support each of your sales. And you’ve stored the information securely, organized and easy to retrieve.
Be sure to take note of all timelines and set by the bank as well as any deadlines. You can't do anything about a chargeback if you miss your window. Always respond to chargeback filings, even if you think it’s not worth fighting. The bank can ding your account for failing to respond.
Then, the first thing you need to do is contact the customer. Even before you respond to the bank. Remember, customers often file a chargeback simply because it's convenient or they were hesitant to deal with the merchant. Having all the purchase information on hand will make it easier to talk to them about their purchase.
This is your opportunity to show your stellar customer service. Many times, issues can be resolved by asking what the issue is. Often, it's a simple misunderstanding. Like when they don't recognize your merchant descriptor on their bill. Or when someone else in the house (a teen maybe?) made the purchase.
If there's a problem with the product, help them fix it. The item can be exchanged, replaced if defective, or returned if they just don’t like it. It is always more beneficial (and cheaper) to give a refund and keep a satisfied customer than have a chargeback.
Next, respond to the bank with your rebuttal or “representment”.
Once you’ve contacted the customer and determined a solution, if any, it's time to respond to the bank. This is called the “representment”. This is because you are re-presenting your transaction data to prove the transaction was valid.
Be sure to respond to all correspondence in a timely fashion. Being early is better than being on time.
Include everything that was requested in your chargeback notification letter. If you have additional information that you believe will support your case, include it. Providing complete and organized data for your “representment” can go a long way.
Fight Chargebacks with an experienced Merchant Service Provider.
You’re not going to win every fight. And some chargebacks just won't be worth fighting.
By preventing the chargebacks you can, and being prepared to fight the ones you can’t, you can have a positive effect on your chargeback ratios. Which in turn results in more dollars kept in your pocket.
At the end of the day, you’ve got better things to do than fight chargebacks. But at the same time, you can't be losing money because it's too easy for customers to commit friendly fraud.
That’s why we’ve curated cutting edge solutions that help our clients keep their chargebacks manageable.
We have extensive experience in high-risk merchant accounts. We’re here to help. If you’d like to learn more about what you can do about your chargebacks, call us today! Or click the link below to one of our ETA Certified payment professionals call you!