A purchase may not go as planned. You may not know if you should issue a refund or fight a chargeback. There are three types of fraud in the world of chargebacks. There’s true fraud. That’s where a fraudster uses stolen information to purchase merchandise. The actual card holder of the stollen credit card then disputes the purchase.
And there’s friendly fraud. This is where cardholders file disputes simply by mistake. They do not recognize the charge and dispute it, even though they actually authorized the purchase.
Lastly, there is chargeback fraud. This is when a cardholder is taking advantage of the chargeback process to steal merchandise. They are trying to regain the transaction dollar amount while retaining the product or services rendered.
Here are some statistics that explain why these chargebacks occur:
A 2017 Lexis Nexis report showed 31% of ecommerce fraud was friendly fraud. We have tips to detect it right here.
Chargeback found that 59% of cardholders contact merchants to learn about their return policy. And one-third of those cardholders said their product return was successful.
By 2020, ecommerce chargeback losses can reach up to $31 billion.
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Here are ten ways to prevent disputes:
1. Descriptions Should Match Products
Disputes may occur when descriptions don’t meet the expectations of the product. You may not have done that on purpose. But you need products to be ‘As Described’ during the purchase. A chargeback will occur if you’re not clear within the description.
You should disclose everything about your product and service. This allows you to disprove disputes that suggest a ‘mismatch’ between the product, service and the description. You can use your description as evidence in a dispute response. You can include images and records that you believe will strengthen your response.
2. Promote Communication
Cardholders need to find the contact number, chat feature, or company email if they want to contact you. Your customer service team should make this publicly available on all platforms. Some examples include emails and social media.
The text should have an encouraging tone. This means that cardholders should be encouraged to contact you for any inquiry. That will decrease the merit of chargeback fraud. And it will force cardholders to contact you before they file a dispute.
3. Ensure Accounting Accuracy
Accounting and finance teams process a lot of data in order to complete transactions. It’s possible to double-charge someone when you didn’t mean to. Cardholders will file a dispute if this occurs. And you can expect a chargeback.
You need a streamlined process for handling transactions. You’ll know it’s working when you’re no longer receiving processing error disputes. For example, a dispute with VCR Dispute Reason Code 12.6 means a cardholder claims you issued a double-charge. You should be due diligent when monitoring transactions. Issuers will not accept that you double-charged someone because you thought the original charge was invalid.
4. Know the Rules and Codes
You’ll effectively respond to fraudulent chargebacks by taking time to know the policies that issue it. This will enhance your knowledge in dispute management and resolution. There are a lot of rules that support chargebacks. And the Chargeback Reason Code Encyclopedia explains it all. You’ll know the different time frames for a retrieval request and a chargeback. You’ll even increase your win rate when you have more knowledge about these rules.
Reason Code Encylopedia
The Chargeback Reason Code Encyclopedia helps you understand anything and everything about dispute management. Download our latest version to learn about the new Visa Claims Resolution (VCR) dispute codes. And learn how Visa’s new dispute process affects you and your acquirer. Download here.
5. Make Dispute Responses Easier (And Save Time While Doing It)
No one wants fraudulent chargebacks. That’s why you should equip your accounting and finance teams with the right training and resources. Dispute responses, formerly known as chargeback responses and representment, are useful when your order data, transactional data and sales data are available in one place. The Chargeback App easily integrates with the your ecommerce platforms and payment technologies.
All of this information will be inserted into the appropriate Chargeback Response Template. All you have to to do is review your response, add additional evidence where appropriate, and click on ‘Respond Now’. This will not only save you time. It will also let you repurpose time for other goals in accounting and finance.
6. Issue A Refund Through Automation
Chargeback vs Refund. That seems to be searched a lot these days. Cardholders are weighing the pros and cons while people like you are reinforcing your business. You can hear a scout shouting, ‘Shield the revenue! Incoming disputes!’. But your time is well spent on other matters than dispute responses. It’s easier and cheaper to issue a refund. This will not only prevent chargebacks. It will also enhance your reputation with cardholders. A more efficient way to issue refunds is through automation. You can learn more about Automated Dispute Management by reading some of its benefits. The Chargeback App has additional automated actions that help protect your revenue.
7. Improve Security
You need to ensure cardholders that your POS terminals and payment processors are secure for transactions. This includes asking for the right information to verify the cardholder’s true identity. For example, a CVC code can help reveal the true identity of the cardholder in question. You should also require signatures for delivery services. This will verify that the delivery arrived at the right shipping address to the right person.
Accounting and finance teams need to be vigilant when handling charges in a small time frame. This includes overseeing bulk orders, delivery addresses with multiple credit cards, and new clients who want rush deliveries. It never hurts to let carholders know how you are protecting their transactions. That’ll increase consumer confidence. After all, you’re disclosing your duties to perform secure payments and efficient deliveries.
8. Make Sure Shipping Is Carried Out Properly
Are you having trouble with shipping a product? Was there an order that was not recorded in the database? Did a product arrive at the wrong address? This is where your customer service and shipping teams can prevent these disputes. A refund is the best option if you answered ‘Yes’ to any of the questions. But if the cardholder wants the product—and there’s evidence that shows it has not been delivered—you should send an email of the new order with a new tracking number. The Chargeback App allows you to reroute shipments in order to resolve these disputes. You can even cancel shipments the if the order is found to be fraudulent.
Whatever action you take, this is a good time to offer promo codes or discounts to cardholders. You want them to acknowledge that you are aware of your mistakes. And that you are offering a complimentary service until it is resolved. That can go a long way in preventing disputes and chargebacks.
Some mistakes are even invisible to team members. They will never be aware of it until you address it. This scenario is called the Dunning-Kruger effect. You can enhance your team’s productivity by having team members correct their invisible mistakes. Learn more.
9. Allow Exchanges
Cardholders may order the wrong product. It happens. But they shouldn’t feel punished whenever they can’t exchange their product.
Each dispute should be handled on a case-by-case basis. And it may not always be possible to grant exchanges for certain products. This should be noted in your policies. But allowing customers to exchange products can reduce the chances of a dispute becoming a chargeback. It shows that you are willing to satisfy the cardholder’s needs in a more informal manner. This means you want to resolve this without the bank’s involvement. This will save you time from dealing with responses. You’re time is better used elsewhere.
10. Monitor social media
I mentioned earlier that it’s essential to make all contact information visible to cardholders. But cardholders will find others ways to contact you. One way is through social media. This is becoming popular since they can present the dispute to you and the general public. That can become a problem if you don’t actively monitor social media content.
Your customer service team should develop a communications plan that focuses on handling social media disputes. We have tips that will bring you to the right direction. You can also monitor social media for evidence that disproves a filed dispute. You can learn more about that right here.
Chargebacks are put in place to protect cardholders. But that doesn’t mean that you have to accept it as a part of business. And fraudulent chargebacks are no exception.
Your skills in dispute management can easily be improved with the tips above. The goal is to ensure cardholders that their disputes are handled with excellent customer service. It also doesn’t hurt to show off your robust processing skills to cardholders. Responses are great. But resolution is betterl. You can contact us to learn about the features of Real-time Dispute Resolution.
Chanell Alexander currently resides in Atlanta, GA. When she’s not traveling and trying new restaurants in the Metro Atlanta area, she writes about the latest technology and tools for TrustRadius.