In a previous article, we discussed what chargebacks are and how much they cost. As mentioned before, you cannot avoid chargebacks as a business. However, you can take steps to help mitigate the number and frequency of chargebacks you receive. Let’s look at the top tips to reduce chargebacks for your business.
How to Reduce Chargebacks for Your Business
Confirm Your Cardholder’s Identification
As with any card payment, business owners should confirm credit cardholders’ identity to prevent fraudulent charges. This is especially true, with stolen credit cards being the primary cause for chargeback fees. Cardholder identification requirements will vary based on the card type and whether it’s a card-present or card-not-present transaction. Common ways to verify identity for card-present transactions include requesting a customer signature for magnetic stripe cards, ensuring that the card has not expired, looking for the signature on the back, and checking a customer’s photo ID. For any card transaction, merchants should always request card verification codes.
Have Simple Return/Refund Policies
Your return and refund policies should be simple, easy-to-understand, and accessible to customers on your business website (and at every POS terminal for brick-and-mortar stores). By being transparent with customers, you can mitigate any confusion they may experience. The last thing you want is for customers to expect free returns and then find out that this isn’t available. Indeed, this can lead to customers not wanting to go through the hassle of paying to return an item and receive a refund or exchange. Instead, the customer may request their bank to remove the charge, and thus, your business is hit with costly chargeback fees.
Use Reliable Shipping Services
In the world of free one to two-day shipping, today’s customers expect that businesses offer convenient and fast shipping at affordable rates. Most importantly, your business should use reliable shipping services that provide estimated delivery dates, tracking updates, punctual and dependable transportation, and proof of delivery. Ensure that you clearly state shipping and processing timeframes on your website and with every confirmed order so customers know when to expect their goods. Aside from shipping delays, your shipping services should consistently deliver products on time and in excellent condition. If this doesn’t happen, your customers may request that their bank remove the charge, especially if the customer didn’t receive any shipping updates or communication from your business. Additionally, it’s a good idea to require signatures for big or fragile product deliveries. This allows you to confirm that the customer received their items.
Excellent Customer Service
Whether you have a physical location, ecommerce store, or both, your customers should always be able to contact you quickly. This includes providing your business phone number, email and website address, mailing address, business cards, sites like Google My Business and Yelp, and at your store if you have a brick-and-mortar location. A live chat box is a valuable and affordable solution if you want to provide 24/7 customer support (useful for tech and SaaS companies). By making it easy for customers to reach you, they will be more likely to come to you with any questions or concerns. No one has the time or patience to hunt down your contact information, so making it painless for customers to connect with you is critical. This can reduce friendly fraud, accounting for around 86 percent of chargebacks. Friendly fraud is when customers submit a chargeback request for other reasons that are not legit fraud. For example, a customer never received a product or was overcharged for an item. Instead of working with a business, they reach out to their issuing bank instead. Thus, quality customer support can help minimize chargeback fees for your company.
When customers contact you, it’s best to assist them regarding your products or services as quickly as possible. If you offer order cancellations within a specific timeframe, make sure to honor this policy if a customer requests it. Indeed, excellent customer service can be the difference between a satisfied customer having their issue resolved or an unhappy customer disputing a transaction with their issuing bank and posting negatively about your company online. Furthermore, it’s recommended to document your customer service policies, such as offering 24/7 support or being available only during regular business hours. This can avoid confusing or frustrating customers that need to know when to contact you.
Have Clear Billing Information
Whenever possible, use your actual business name on all card transactions and receipts. If you use a DBA (doing business as) or parent organization’s name instead, your customers may not recognize these credit card transactions. Thus, they may think it’s an unauthorized or fraudulent charge and request their bank remove the transaction. This would be unfortunate since the customer likely authorized the transaction but expected your business name to appear on the transaction. Indeed, this would be a typical example of friendly fraud. The key takeaway is to have precise billing details that your customers will immediately recognize as the same name on your site or store. Additionally, you may want to include your business phone number and hours of operation on billing statements. This makes it easy for customers to contact you for assistance.
Use Clear Pricing and Discounts
As a business owner, ensure that your products and services have transparent and documented pricing. If you offer discounts, explain how to qualify for these offers, such as being available for a limited time or needing to sign up for email or text notifications. It’s best to itemize everything on receipts and order confirmations so customers know what they were charged and how much each item cost. This is a vital step to avoid customers being confused about their orders.
Further, customers that receive recurring subscriptions should receive notifications before charging their cards. Your customers will appreciate these payment reminders, so they can decide whether they want to continue using your products or services. Since customers are busy, they may forget they signed up for a recurring service that they no longer want or need.
Maintain PCI Compliance
One of the best tips to prevent chargebacks is following the rules and acceptance guidelines for each payment processor your business uses. Any company that handles card payments must meet PCI compliance. These requirements are designed to protect cardholder data. If you need to meet PCI DSS requirements, it’s recommended that you choose a reputable network of payment service providers to help achieve compliance. Check out this handy six-step guide to become PCI compliant.
Don’t Let Chargebacks Define Your Business
We hope this article was helpful and provided some useful tips to reduce chargebacks. While you are likely already aware of many of these suggestions, it never hurts to be refreshed. After all, it’s a lot of work owning and maintaining a growing business! If you take anything away from this article, remember to adhere to card network guidelines, always be honest with customers, and assist them in a quick, timely manner. It’s impossible to totally prevent chargebacks, but following these tips can encourage customers to work with you to settle issues rather than disputing transactions with their banks. As a result, this can help improve your business operations, cash flow, customer service, and reputation with card associations.
Since credit card fraud makes up 30 percent of chargebacks, it’s also recommended to adopt fraud prevention solutions, such as 3-D Secure, in addition to the tips mentioned in this article. 3-D Secure is a three-step process that verifies a cardholder’s identification before an online debit or credit card transaction is authorized. This shifts the liability from the merchant to the issuing bank regarding fraudulent charges. For businesses, this means that you will not have to pay chargeback fees if a transaction is unauthorized. Contact TokenEx today, a leading tokenization and 3DS partner giving customers the freedom and flexibility to work with any payment processor they need and the ability to create a holistic security approach combining various layers like 3DS, network tokens, and Kount fraud protection.