A chargeback is a process where a customer asks their bank to reverse a payment on their credit or debit card. It is also known as a payment dispute. When a customer requests a chargeback, the amount of the transaction will be removed from the merchant’s account and will be refunded to the customer. As chargebacks are a form of customer protection, it falls on the merchant to prove that the transaction is legitimate. If the merchant can prove this, the funds will be returned to the merchant, but they will still be liable for penalties and other fees, and it can be a very long process. If the merchant fails in their efforts to challenge the chargeback, they will be liable for charges as well as being out of pocket for the actual goods and shipping, as goods do not have to be returned to the seller in a chargeback situation.
Customers may request a chargeback for several reasons:
- The customer did not authorize the charge – most commonly because the card was lost or stolen
- The customer did not recognize the name of the merchant on the statement
- The customer was charged twice in error
- The customer did not receive the product or services that they purchased
- The customer received broken or damaged products
- The customer received the product, but it did not meet their expectations
- The customer was charged for a subscription that they had canceled or had lapsed
These of course may be legitimate reasons, but sadly there is another reason, and that is that the customer simply does not want to pay for the product and feels that a chargeback is an easy way to get goods for free.
Chargebacks will always happen, as life is not perfect. But they are troublesome for merchants in more ways than one. Not only does the merchant forgo the value of the goods plus shipping if the items have already been shipped, but penalty charges and other fees may apply, regardless of the outcome.It also takes time and effort to challenge a chargeback. And if the merchant has a high number of chargebacks, those fees will increase. In a worst case scenario the merchant will have their contract with their payment provider terminated, and will find it difficult or expensive to find a new provider.
For a small or new business, chargebacks are a real threat to revenue. But there are several ways that online sellers can improve their processes to help reduce chargebacks, and also help to challenge them when they do occur.
Have a simple and easily accessible refunds and returns policy.
Most times a customer will try to firstly engage with the seller in order to resolve a problem. And for the merchant it is far preferable to resolve a problem directly with the customer, before they go to the bank. At the least this way you are more likely to get your goods back, if nothing else.
Have a clear, easy to read returns policy on your website, and make it easy for your customers to find it. Also make it easy for your customers to return goods to you.
Provide accurate product descriptions on your e-commerce website.
Make it extremely clear exactly what the customer is purchasing. Include things like pictures, sizes, colors, materials, dimensions and other specifications. If the product contains multiple parts, such as electronics, state exactly what is in the box. If the product requires another product in order to work, make this very clear. Make sure that your checkout page clearly shows options that the customer has chosen, and allow them to make changes at that point. In your confirmation email to your customer include again the details of the items they purchased.
Provide realistic and accurate delivery times.
If a product is going to take 6 weeks to ship, make sure your customer knows that. Include the delivery times with the product information, checkout process and the invoice. And if a delivery time is going to be delayed, contact your customer and inform them, perhaps with an option to cancel.
Make it easy and pleasant for your customer to contact you.
Have your contact details clearly visible on your e-commerce website. Include multiple channels of communication, such as telephone, email, social media or chat applications. As a small business you may not always be able to answer immediately, but at the very least use an automated system to acknowledge the customer and let them know that you will be in touch as soon as possible. Provide great customer service and your customers will return if they know you are willing to help them with their problems.
Send confirmation emails to your customer.
Send the customer emails with order numbers, purchase information, invoice and delivery times. Include your contact information on every email. Also send emails to confirm that their goods have shipped and include tracking information.
Help your customer recognize the billing details on their statement.
If the name that will appear on your customer’s statement is not the same as your company name, the customer could think that the charge is fraudulent. So if you bill under a different name to your trading name, inform the client what the charge on their account will reflect as. Confirmation emails are a great place to put this as there will be a record of the email.
Choose a shipping partner with tracking capabilities.
Dropping a package at a doorstep unattended may not be the best choice for most locations. Choose a shipping partner with good tracking and delivery confirmation methods, so that you can easily prove that the package was delivered to the intended recipient. And make sure your goods are packaged well to avoid damages in transit.
Use a payment provider with great security.
Make sure the payment provider you choose has excellent security protocols in place and is PCI compliant.
And above all – keep meticulous records, you are going to need them to challenge a chargeback.
At Baer’s Crest we fully understand how daunting chargebacks are for new or small businesses, and we know what the repercussions are for high chargeback rates. We provide our clients not only with excellent payment solutions, but we also assist in dealing with chargebacks, so that you can concentrate on making sales and building your business. Talk to us [link] about payment solutions for your business.