Charge Backs: Digital transformation has changed the way companies conduct their business operations, especially after the pandemic affected all of our lives. Regardless of which industry they belong to, everyone had to find a way to adapt and transfer their business operations online. While it took adjusting from everyone, the biggest task was placed in front of commerce businesses. In order to stay competitive in today’s busy world, everyone from small or mid-size to big commerce businesses had to undergo digital transformation sooner and faster than they had anticipated.
This helped businesses not only to stay competitive but also to reach more customers around the world. Unfortunately, it has also introduced various dangers that eCommerce businesses had to deal with now, such as chargeback fraud. Fortunately, as SEON’s chargeback fraud prevention explains, there are ways in which eCommerce businesses can protect themselves from the suffering consequences of chargebacks.
What is a chargeback?
A chargeback has been an ever-present nuisance of commerce for a long time already, but the threat became even bigger with the rise of online shopping and eCommerce businesses. A chargeback is a process a customer initiates with their card provider by disputing a transaction and requesting reversal of payment. Their card provider forwards the dispute to the merchant who can fight against it which often still results in the refund or accept it. Most often, when a chargeback happens it happens as a result of fraud and can damage the merchant significantly. Not only did the merchant lose the sale revenue, but they also lost a product or a service, they need to pay an additional chargeback fee and in some cases when the merchant is receiving a larger number of chargeback requests bank will terminate their account as they believe that account is high risk.
By identifying your standard sales pattern, you will be able to also spot some discrepancies that might indicate chargeback fraud and use that knowledge to stop it before it can do any damage.
- The unusual size of orders ( Unusually large or unusually small orders can indicate suspicious activity)
- Customer demanding faster order processing and shipping ( might indicate they want order processed before legitimate card owner notices a transaction and stop it)
- Customers use different shipping addresses but the same payment details or the opposite.
- Discrepancies between IP address and billing or shipping address
What can you do to protect your store from chargebacks?
Chargebacks are becoming a standard now, and not a rare occasion like before, which means it is going to become an even bigger threat. Businesses can no longer afford being passive and just wait until they are directly affected, often that means that once it happens it is too late to do anything. Fortunately, by following these tips you will be able to significantly reduce the risk of chargebacks affecting your business.
1. Utilize security protocols
While having a firewall and antivirus or antimalware programs is essential in protecting your business, it is not enough. You need to start utilizing different cybersecurity tools like data enrichment, device fingerprinting or email lookup that help you gather more information about your users, identify patterns and help you recognize any deviation from the standard pattern. This can be critical in stopping fraud attempts like account takeover or identity theft which most often result in chargebacks.
2. Be clear
It is important you are clear and matter of fact with all of the aspects of your business to ensure customers understand what you are offering, what your policies are and who you are. This can be critical in preventing chargeback.
- Clearly and accurately describe your products and include photos of it taken from different angles to avoid customers requesting chargeback due to the product not meeting their expectations
- Create clear and easy to understand return and shipping policies so there is no place for misunderstanding.
- Pay attention to your merchant descriptor. It needs to be clear and simple to reduce the risk of customers not recognizing the transaction when it shows up on their card statement and requesting a chargeback. For example, if your business name is “Lamp”, your descriptor needs to indicate that and not be something completely different like “Blanket”, this can only confuse the customer and result in chargebacks.
3. Be accessible
A large number of chargebacks are the result of the lack of communication between the merchant and customers. By being accessible and easily reached you will encourage your customers to contact you first before they request a chargeback and to give you a chance to fix the situation.