Chargebacks occur when a customer files a dispute with his/her bank regarding a credit/debit card transaction. The problem arises when the merchant doesn’t participate in the dispute process or is informed too late. In 58% of all instances, merchant are never notified of the pending dispute, which makes them helpless and unable to defend themselves against the initial chargeback.
Top chargeback reasons are:
- Fraud/no authorization – 57.9%
- Cancel recurring billing -18.6%
- Product/services – 18.3%
- Liability shift – 3.5%
- Others – 1.7%
With a reputable payment processor like emerchantbroker.com, you can enjoy the top chargeback prevention and protection services in the industry. EMB is voted the number one high risk processor in the US and has an A+ rating with the BBB. EMB provides exceptional credit card processing and business funding opportunities to both traditional and high risk merchants.
Chargeback Statistics
- Ecommerce industry lost of $6.7 billion in revenue because of chargebacks in 2016, out of which 71% ($4.8b) was caused by friendly/chargeback fraud
- Every dollar of fraud cost ecommerce merchants $2.40 in 2016, up from $2.23 in 2015
- Estimated average monthly value of successful fraud transaction accounted for $146 in 2016
- 68% of online businesses were expecting more fraud this year
- 62% of online businesses are going to invest more in fraud prevention
- 40% of consumers filing a fraudulent chargeback will do it again within 60 days and 50% within 90 days
- Credit card chargebacks are increasing at a rate of 20% annually
- Friendly fraud increased 41% over the past 2 years
How to Avoid Chargebacks?
Here are steps you, as a merchant, should follow to reduce the risk of chargebacks:
- Check the expiration date and enter the security code on the front or back of the card.
- Stick to a DBA (doing business as) name or use clear payment descriptor that your customers will recognize. Your phone number should be printed on the customers’ billing statements.
- Ensure that the credit cards used to purchase your goods/services have not been stolen.
- Make sure your services are valuable to your customers and clearly indicating what they should expect when they make a purchase. Your website should have a refund policy page.
- Avoid accepting expired credit cards.
- Get your customers’ authorization in writing. Require customers to sign a contract that includes the specific services your company will provide.
- Learn to detect warning signs of fraud. Pay attention to alerts that inform there are any suspicious details like incorrect credit card security codes, or billing and shipping addresses that don’t match.
- Train your employees in how they can deal with both card-present (CP) and card-not-present (CNP) transactions, look for suspicious transactions, verify signatures in card-present transactions, and obtain signatures on contracts and sales orders when appropriate.
- Keep accurate records of customers’ credit card transaction dates, amounts and authorization information. This will help you win a dispute against a customer.
- Fight back only if you think you could win a case. A history of chargebacks can deteriorate your relationship with your merchant account provider.
Higher chargeback rates can result in huge losses and negatively impact your company’s image among credit card processors. Fortunately, there’re steps you can take to reduce or avoid chargebacks and protect your business against unfair chargebacks.