Chargebacks can have a huge, negative impact on a business. Chargebacks occur when a customer files a dispute with their bank in regards to a debit or credit card transaction. The part about a dispute that makes a merchant helpless is when the customer fails to notify the merchant about the pending dispute; this is the case 58% of the time. The merchant is left in the dark and therefore unable to defend themselves against the initial chargeback.
When a chargeback takes places, the customer’s money is refunded, in some cases forcibly, by the issuing bank due to the problem with the transaction. While fraud can be the reason for a chargeback, a dispute over credit, repeat charges or a merchandise return can also be the reason. Chargeback fraud occurs when a customer purchases items over the internet using their card and then disputes it to have it refunded. Friendly fraud occurs when the customer intentionally initiates a chargeback even though they have already received the merchandise or services.
With more and more customers resorting to the internet to make their purchases, fraud is becoming more and more common. The cardholders themselves enjoy protection from their issuing banks. Merchants, on the other hand, are the most affected by this type of fraud. Merchants can be left without their merchandise that was purchased or without the money for that particular merchandise.
Merchants don’t have to be completely without protection. For merchants that have chargeback insurance, they can be reimbursed for the amount of fees and chargebacks that have been incurred by the bank handling their merchant account. Having this insurance involves paying a monthly premium.
For merchants that have a large number of their transactions occur over the telephone or internet, a chargeback insurance policy is a very good investment. It is very difficult to predict the frequency of these types of transactions, and therefore the number of times the merchant will experience fraud. This is the biggest reason why having chargeback insurance can be helpful in ensuring financial stability.
Don’t allow chargebacks to hurt your business’ revenue stream. Chargebacks can create up to 270% of a loss on a single chargeback. Having a chargeback “shield” can help you stop disputes. You will be notified quickly and be involved in the process – no more being left in the dark. Chargeback insurance has become an important tool in merchants’ plans to gain control of the quality of their business’ transactions.