Merchant account forums

Definition: A chargeback is an amount of money the merchant must refund to the customer. Such fees can occur for a variety of reasons: The merchant didn’t deliver the product, or alternatively the customer claims they have not received the product, or is unsatisfied with your service. The customer’s card may have been double charged, or alternatively expired. Regardless of the reason, the intelligent merchant is forever seeking out new ways to reduce the risk of refunds.

The Consequence
Not to confront these issues can prove detrimental to your business. High and plentiful chargebacks can put you out of business altogether. Merchant service providers will shut down your account if your refunds pose a threat to them, as they are financially liable. Subsequently you will find yourself on the TMF/MATCH list, VISA and MasterCards’s respective ‘black lists’. Consequently it will be very difficult to reinstate yourself as a licensed merchant.

The following, outlines realistic advice on how to reduce and prevent chargebacks and refunds - not only to ensure your merchant status but also to help maintain and maximise profits.

Bonuses
In addition to the actual service you are providing, ad-ons or freebies will heighten the level of customer satisfaction. By delivering a product over time or alternatively delivering free, ‘in addition to’ bonuses, customers are far less likely to ask for refunds as they have more to gain. This is easily implemented through the use of auto response emails that inform existing customers of an up-and-coming benefit or free bonus.

Honesty
In the event that you use a third party to process your customer credit card transactions make sure the customer knows what name will appear on their credit card bill. A disadvantage of third part processing sees the processors name and not your company name on the bill. If the customer does not know to expect this then they will undoubtedly dispute any charge under an unfamiliar company name.

Availability
Ensure that you have clearly supplied the customer with all relative and realistic contact information. In addition make sure you or a colleague is readily available to deal with queries. If the customer cannot find reassurance or explanation through your service then they are more likely to initiate a chargeback without you realising

Over Delivery
Similar to bonuses, by over delivering your service, perhaps with added features or earlier delivery times than stated, gives the customers the sensation that they are getting more than what they paid for. Realism coupled with a bit of tact can make a standard service seem like an unbelievably good deal, customers are far less likely to complain.

Security
By documenting when, to whom and how products were sold makes it harder for a customer to dispute against your evidence. There are also electronic solutions that help verify and legitimise the customer such as AVS and CVV2/CVC2 verification:

AVS (Address verification system) refers to an automated procedure whereby customer card details are checked against the card billing address when a purchase is made. CVV2 and CVC2 are three digit verification numbers found on the back of Visa and MasterCard’s respectively. Implementing AVS in conjunction with requiring card verification codes will massively reduce the amount of fraudulent sales and consequential chargebacks.

Conclusion
Reducing chargebacks lies above all with the merchant. Merchant service providers will offer a certain level of security in terms of electronic solutions but it is up to the merchant to implement more practical defences. Customer security and loyalty is paramount, the better they feel in your hands the less likely they are to request refunds and the more likely they are to come again.