Welcome to part three of Swipen’s ‘Payments Parlance’ blog series. Acronyms, techspeak, compliance, and seemingly random fees can leave us all confused and wondering, ‘what does it all mean?’. These blogs are designed to help explain the terminology, issues and charges that often surface within the payments industry.
Today we continue with chargebacks and how to reduce them.
What is a chargeback?
A chargeback is a dispute and potential reversal of a payment. After any purchase, there’s the possibility of buyer remorse, whether it’s legitimate (goods or services not as described, not delivered, change of mind, or an incorrect transaction amount) or fraudulent (unauthorised by the cardholder or a false claim of non-delivery). Chargebacks are initiated by the cardholder to their card issuer, which triggers a dispute resolution process and possible reversal of the payment.
What happens after a customer triggers a chargeback?
The customer usually has 120 days to file a dispute. When the customer questions a transaction, you are advised and the disputed funds are usually held from your business until the card issuer investigates the dispute and makes a decision. If the bank rules against you, those funds are returned to the cardholder. If the bank rules in your favour, they’ll send the disputed funds back to you.
What’s expected of my business?
The chargeback process can differ between card issuers, but you will be given time to either concede the issue and trigger a refund, or provide the necessary evidence if you believe the transaction was legitimate.
Is a chargeback fraud?
Not necessarily. Chargebacks normally occur because a customer either doesn’t recognise the transaction on their statement, they’re not happy with some element of the product or service, or the amount charged is not correct. Whether upheld or not, such chargeback disputes are legitimate and just part of running a business. However, chargebacks can also be due to fraudulent activity, usually involving either a stolen card or a disingenuous customer.
How can I reduce the risk of chargebacks?
Chargebacks are time-consuming and cost your business money, so it pays to invest in fraud detection and prevention to reduce the risk.There are many ways that Swipen can help you, including:
- Act as an advocate between you and the disputing bank.
- Assist you with gathering the necessary evidence, such as receipts for goods, time of goods delivered, and form of card acceptance (EMV or contactless). We also pass details to the customer’s issuing bank to help them determine if the customer is being truthful.
- Help to ensure your business’ terms & conditions, and your chargeback, refund and return policies offer better protection; well-written policies can be an effective fraud deterrent.
- Provide state of the art card terminals to provide more secure processing of EMV chip cards (dipped, not swiped), and acceptance of contactless payments, including Apple Pay.
- Advise on CNP (Card Not Present) transactions, ensuring they run through 3DS and/or AVS on the gateway to help mitigate fraud.
Is there anything else I can do to reduce chargebacks?
Yes, there are some best practices worth considering for your business:
- Ensure your customer service is excellent. Communicate with your customers and keep them updated regularly on delivery or anything else relating to their order.
- Offer refunds – chargebacks protect the customer and offering refunds develops a sense of trust. A refund is also much easier to deal with than a chargeback.
- Keep your trading name consistent to reduce the risk of customers not recognising your transaction on their bills.
- Ensure quick and tracked delivery once you’ve received the customers payment.
- Keep as much detail as possible for all transactions and deliveries. Share this with the customer after each purchase to minimise queries.
Sadly, it’s not possible to stop chargebacks completely and it’s never nice to be at odds with your customers. Swipen is here to help you and keep any chargebacks to a minimum.