Skip to content

Data Breaches Can Hurt a Small Business Without Chargeback Protection

It appears that every month there is a report on the news that another mega-company has been hacked and millions of customers’ information has been stolen. Target alone has to pay $10 million in settlement including legal fees for their breach. The attorneys reaped most of the rewards with the average affected customer only seeing $.25 if he filed a claim. However, now that there are so many breaches the courts are learning just how much it costs a customer who has had his identity stolen. Twenty-five cents is just not going to cut it. More money is going to have to come from somewhere. In times of uncertainty the wise merchant will have chargeback protection. We are not picking on Target. So far they have paid in excess of $162 million for the breach.

Stopping Chargebacks before they happen can help most merchants. In today’s processing environment there are four categories of chargebacks with the largest one being fraud. This is when the credit card is used without the authorization and consent of the cardholder. In cases like these, the merchant is held solely responsible. The other instances are the customer received a different item than ordered, the customer returned an item and did not receive credit, and numerous other scenarios. The crux of the chargeback system is that 58% of the time there has been no communication with the merchant. The chargeback has come as a surprise around 60 days after the sale was made.

With chargeback protection the merchant is included in the loop. When there is a problem with a sale, rather than the information going directly to the issuing bank, the merchant is alerted. This gives him the opportunity to save the sale or issue a credit. A credit is not a chargeback and does not have any impact on the chargeback ratio.

In addition to a merchant doing everything possible to ensure that it is the card holder making the purchase, chargeback protection can indicate that there is a likelihood of fraudulent activity way before a major retailer announces a data breach. Every consumer has a typical shopping pattern. When the software detects a major change in this pattern it sends up a red flag. For instance, a consumer has and keeps a $2,500 open to buy on his credit card. All of a sudden there are charges for multiple electronic items of the same kind and it is happening every day for a week. The red flag gets waved and the merchant has the option to accept or not accept the sale.

Merchants who want to protect themselves from excess chargebacks need chargeback protection from card processing specialists like EMB. A professional in the area will be happy to answer any questions you may have. The call is free and you are under no obligation.

*EMB is not an actual insurance provider. We offer an alert system that allows a merchant to refund a chargeback before it becomes one.