Chargebacks are a growing pain for merchants. The set of laws controlling chargeback requests favor shoppers, making it difficult for business owners who must protect their bottom line and impress buyers.
Merchants must tread carefully, especially if they are vulnerable to chargebacks because too many of these could lead to costly consequences. If a customer pushes for a refund for one reason or another, the retailer remains accountable for the reverse charge.
Credit card fraud could also lead to chargebacks. Your business is held accountable if a customer’s card is fraudulently used to make a purchase from your ecommerce store, and the card owner claims a refund.
Because chargebacks are inevitable and can’t be avoided completely, developing an effective mitigation plan is a good start to reduce future cases.
Your plan should do to things (1) prevent situations that may cause a disagreement between the business owner and the customer, and (2) seek to validate the true identity of every customer that makes a payment through their website.
Start by setting clear policies and a hassle-free customer claim process so that you can make a product swap or pay them back before they file a dispute. Business owners with unfriendly return policies or refunds experience chargebacks frequently.
A Summary of the Chargeback Process
The process of a chargeback can differ depending on the credit card issuer. The process can be a nuisance for the merchant since it can take up much time.
The process starts when a customer issues a complaint on their card issuer for a transaction.
Most cases are divided into:
- The product wasn’t received
- The product was defective
- An unwarranted transaction
The business owner rarely has a win in chargeback disputes with most resulting in a loss.
The card issuer makes a decision on the authenticity of the chargeback based on the claim and releases funds to the customer or can cancel the chargeback.
A mitigation plan is vital in reducing the rate of chargebacks for any merchant.
Developing a Chargeback Mitigation Plan
We have no one-plan-fits-all remedy for preventing chargebacks because the case is not the same for all businesses. Each firm has its set of problems, thus making it hard to create a fixed plan for everyone to follow.
However, an exhaustive mitigation plan should:
- Be able to monitor transactions and detect fake transactions.
- Investigate the causes of the chargeback.
- Prevent everyday activities that lead to most chargebacks
- Develop policies to prevent fraud cases
- Refine customer relationships.
The Pros of a Well-Thought-Out Mitigation Plan
Implementing a proper mitigation plan has several benefits to the merchant and the business. Some of them include:
- Increase in sales and profit
- Decrease in liabilities
- Higher revenue
- Fewer disputes and refunds
- Better relationships with customers
- Improving brand status
It is crucial as a business owner to create a good chargeback mitigation plan to prevent future losses. A well-thought-out strategy leads to fewer disputes and liability, happier customers, and more profit.
Author Bio: Electronic payments expert Blair Thomas is the co-founder of high risk payment processing company eMerchantBroker. He’s just as passionate about connecting businesses with chargeback insurance providers as he is with traveling and spending time with his dog Cooper.