Since banks have automated the chargeback dispute process, consumers will now find it very easy to file credit card charges. Currently, customers can file disputes by only a few clicks through the mobile banking apps in their Smartphones. And while consumers are happy about it, what does this mean for small business owners?
A chargeback could cost a retailer about $20 to $50 minus the lost sale. Statistics from Aite Group show that banks in the U.S. will process a whopping $5.6B in chargebacks this year, a 17% increase from 2015’s figures.
However, if you have to prevent chargebacks, you must understand why they occur. Here are the most common causes of chargebacks as listed by Chargebacks911, a top risk management company:
- Fraudulent transactions
- Duplicate processing
- Transactions not recognized by cardholder
- Goods not received or Services not rendered
- Credit not processed
- Transaction charges differ from the amount agreed upon
Shelter your business from chargebacks using the following tips:
- Make the most of the latest tech:
Most credit card processors are currently investing in tech that are quicker and better at spotting fraudulent transactions or preventing unnecessary chargebacks before they are fully processed. For instance, services like Verifi enable you to contact the issuing bank way before the acquiring bank receives the request for a chargeback. This way, you can potentially deal with conflicts before they cost you.
- Use a chip card reader:
Make sure you use the most recent hardware in the market to process your card payments. It should be remembered that two years ago, a new liability law that shifts fraud accountability to the “least EMV-ready party” was implemented. Therefore, if you’re the merchant stuck in the old ways of magnetic strip readers that can’t accept chips; it’s time you contact you processor to see if they have better alternatives.
- Confirm that the buyer is the actual cardholder:
A good number of merchants ignore the simple validation process that can aid in identifying and stopping fraudulent credit card transactions. Always verify that the signature on the receipt matches the one on the customer’s card. Also, you can ask for an ID to confirm if the names on it match those on the card. As simple as these steps may look, you’ll thank yourself later when you realize how much you’ve saved in chargebacks.
- Keep clear records of everything.
Regardless of how vigilant you are, you can never avoid all chargebacks. On the other hand, you stand better chances of having them reversed if you keep detailed records of all your transactions. Proper documentation will help you out when responding to an invalid case.
- Train all staff that deal with payments:
All the above steps won’t matter unless your staff are educated and forewarned of potential dangers. That means if you have to successfully fight chargebacks then you must pass along these lessons to all staff that handle payments.
Chargebacks can bring down your business especially if you are the merchant who receive payments mainly through credit cards. However, with the above measures, you can fight chargebacks and smoothly solve cases that may harm your credit before things go out of hand.