A business owner’s worst nightmare: being notified of chargebacks. Suddenly, what was operating smoothly is now stalled and growth is being threatened. According to analysts, chargebacks have gone up as Continue Reading
A business owner’s worst nightmare: being notified of chargebacks. Suddenly, what was operating smoothly is now stalled and growth is being threatened. According to analysts, chargebacks have gone up as much as 30% in recent years. In a business climate like this, merchants simply cannot afford to incur unnecessary expenses or take a passive stance to anything impacting revenue.
What is a Chargeback?
What is a chargeback? A chargeback occurs when a customer formally disputes a charge by contacting their credit card issuer. There are many reasons why they might do so, but some of the most common are not recognizing the amount, not recognizing the business or disagreeing with the transaction.
Unfortunately, chargebacks strike at the very heart of your business revenue. And it doesn’t stop at the single disputed transaction. Chargebacks incur costly fees. They can also endanger your relationship with reputable payment processors and waste valuable time, manpower and other resources. In fact, experts say a single chargeback can end up costing up to three times the original transaction amount.
Understanding Chargeback Fraud
Chargebacks can be sorted into several different (broad) categories:
- True fraud occurs when cyber-criminals use stolen credit card information to make a purchase. These account for around 5-10% of merchant’s chargebacks.
- Friendly fraud, on the other hand, happens when a legitimate customer decides they are going to dispute a charge after making a purchase; 60-80% of chargebacks can be attributed to friendly fraud.
- Finally, merchant error and mistakes can also result in chargebacks (10-20%). For example, incorrect payment processing and customer service mishaps.
How to Manage and Prevent Chargebacks
How do you prevent chargebacks from occuring and manage them efficiently when they do? The key is to pattern with the right processor and be proactive. Experienced payment processors will know specific strategies for dealing with different chargebacks issues. Just make sure you choose a provider that understands the challenges your business faces and the ins and outs of your industry. With the right strategies and support, you can keep more revenue, avoid expensive fees, and build a loyal customer base.
Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of chargebacks. He also writes non-fiction, on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie with ice-cream on his backyard porch, as should all right-thinking people.