Chargebacks and a small amount of fraud are a part of doing business in the modern era for all companies, no matter how large or small. The fact of the matter is that there will always be some amount of fraud and even “friendly chargebacks”—honest mistakes or misguided chargebacks by legitimate customers. The more you can reduce your chargeback and fraud percentages, however, the better for your business. Chargebacks and fraud are expensive and
A list of common chargebacks and their associated billing codes can be found here. Take a look at the list and see how many of these chargebacks are common in your fraud losses. If you are like most businesses, the answer is all of them! Even if you can’t avoid all chargebacks, there are a few ways you can drastically reduce your fraud percentages:
Verify the identity of the cardholder
Make sure that the person making a purchase is the named cardholder. Check id, compare the signatures, verify that the shipping address matches the billing address, or hire a trusted identity as a service. If a customer wants an item shipped somewhere other than the billing address, it can be an indicator that you should look into the situation further. It may be something as simple as a gift, but do take the time to do extra verification if you see anything that seems unusual.
For in-person transactions, use a point-of-sale device that reads EMV chips. Chip cards are harder to fake and have more sophisticated encryption than cards read with a magnetic stripe alone. There is an initial time and cost commitment to switch over to chip readers, but the reduced fraud rates should more than pay for the transition over time.
Communicate with your customers
Chargebacks from legitimate customers often called “friendly chargebacks,” are often a result of a misunderstanding, such as a customer that did not know they would be charged for something or does not remember signing up for the service. Make it very clear what someone is agreeing to pay for at the onset. It is always easier to explain the terms at the beginning than it is to handle disputes or pay fees for chargebacks stemming from miscommunication.
Dealing with customer complaints and disputes quickly will also reduce your fraud percentages. If you make it easy for customers to reach you with questions or disputes, you may be able to resolve the matter in a less expensive way and retain a future customer.
Your only recourse to fight against chargebacks is stellar documentation. Make sure your customer agreements are in writing…and actually get signed! It will do you no good to have a contract that is left blank. You may need to invest in better training your employees to make sure that every agreement is signed every time. In addition to a signed service agreement, save transaction dates, signed sales receipts, and authorization information to use in a dispute.
All businesses deal with a certain number of chargebacks and fraud, but following these steps to reduce your business fraud percentages will help save your money and time.
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