Chargeback Protection & Management for Merchants

Chargebacks are a Huge Problem

Having the ability to accept credit cards for your business is essential. With this, your company can earn more profits than just having an e-commerce brand that can only accept PayPal, for instance.

On the other hand, e-commerce fraud is a huge problem. And even though there are various technologies available to prevent chargebacks, businesses continually struggle with them. Some of the reasons why these struggles continue are as follows:

  • Merchants usually don’t worry about fraud because they focus on their business.
  • They usually don’t have enough expertise in fraud prevention.
  • There are several forms of e-commerce fraud that require a keen understanding that merchants usually don’t have.

Due to these issues, chargebacks are likely to occur in numbers that can dreadfully consume your profit. Therefore, it is necessary to combat these potential fees and avoid possible fines due to the reversal of credit card transactions.

Three Categories of Chargebacks
A chargeback is a transaction that includes the customer’s financial institution forcefully reversing a fraudulent credit card payment charge. Consequently, the merchant will have to pay the funds back and pay added costs to reverse this. To be more specific, this additional cost could be about $15 to $100 for payment processing. Chargebacks come in three categories:

Merchant Error Chargebacks
These are unauthorized expenses incurred by your business. For instance, you or an employee may have accidentally double-charged a customer or entered the wrong credit card information. Also, maybe you sent a different product to the customer than what the customer ordered. While mistakes do happen, you can prevent most of the mishaps by utilizing software that will alert you of possible double charging. You can also use the best fulfillment and shipping practices to eliminate these issues.

Friendly Fraud Chargebacks
A friendly fraud chargeback is when a customer who used a card to make a purchase disputes the bank about this charge instead of disputing the bill with the merchant. This situation can occur with POS transactions; however, they typically happen with e-commerce transactions.
It is difficult to stop friendly fraud. However, you can mitigate good customer service and strong return policies to eliminate this problem. You should also hire high-quality representation to argue your case during a dispute.

True Fraud Chargebacks
This is when a person other than the cardholder uses an unauthorized credit card. Most of the time, someone stole this credit card, and when the cardholder finds out, he/she makes a dispute with the credit card company.

Chargeback Protection- What is It?
Chargeback protection services are the key to combating criminal fraud. Chargeback protection includes any procedures, features, or services to protect merchants from chargeback fees and reduce chances of fraud. Merchants must use different measures for each type of chargeback mentioned above.

With chargeback protection, you can prevent fraudulent charges and mitigate fraudulent charge situations. For instance, in these circumstances, you can request the customer for more credit card verification, such as the card’s security code or address verification, before they can complete the purchase to eliminate fraud.

To eliminate merchant error, you can use shipping processing practices, inventory management, and a high-quality customer management system. However, you will encounter the most significant challenge when it comes to friendly fraud due to several steps required for chargeback protection. You should always encourage customers to come to you first in your refund system. Secondly, you should get familiar with chargeback issues to learn the proper steps to take when you receive a chargeback notice that you think is valid. These steps include submitting the transaction to your bank so that the bank can dispute the issuing bank’s chargeback. Chargeback representation also enables you to choose the valid reason for overturning the chargeback. Using more security measures, such as the security code and address verification, helps establish your case.

Other Chargeback Protection and Management Information
You can search for more information about chargeback protection and management through software partners, proprietary systems, and third-party services. Your payment processing system may offer some protection with proprietary systems, but they do not have the added protection associated with proprietary systems.

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