Any online store owner, who accepts credit cards, will most probably deal with chargebacks at some point during their business lifespan. In some industries, chargebacks account for almost 10% loss in revenue. In 2016, chargebacks cost the e-commerce industries nearly $7 billion. Thus, a business that accepts credit cards must be prepared to face a chargeback dispute.
What are E-Commerce Chargebacks?
A chargeback is filed when a consumer disputes an online purchase made using their credit card, alleging that it was without their knowledge. There are other reasons as well, based on which a consumer can opt for chargebacks. We shall see them later in this article. When a consumer files a chargeback dispute in the bank, it demands justification of the transaction from the retailer. If the retailer fails to provide adequate proof, the concerned credit card company reimburses the consumer in full and debiting the business’ account. Additionally, if too many chargebacks occur, then the retailer is subjected to penalties.
Why E-Commerce Chargebacks Occur?
The general categories that chargebacks fall into are:
- Fraud: Affiliated marketers permitted multiple transactions to increase their revenue, cashing out before the merchant detected the fraudulent activity.
- Customer dissatisfaction: The buyer did not receive the commodity. Else, there were issues in packaging, shipping, and delivery.
- Lack of Customer Support: The consumer did not get adequate support from service representatives during the online ordering process.
- Processing Issues: Online transaction errors occurred at the business’ or payment processor’s end.
How to Minimize E-Commerce Chargebacks
Below are a few approaches to manage e-commerce chargebacks:
- Efficient Customer Support: A dynamic and competent customer support team to assist the buyer at every stage of product online purchase. Provide support through live chats, customer care, and knowledge base.
- PCI Compliant and Adhere to Payment Processing Rules: Technical and operational standards according to payment card industry (PCI) compliance standard to be followed by business, while processing and storing credit card data. Follow all the rules along with tracking of transaction authentication.
- Processor with Good Support System: Business should provide excellent customer support. Similarly, the processor should give access to retailers, a capable support system for the smooth functioning of the business.
- Accurate and Timely Shipment of Orders: Avoid errors in the delivery address, inadequate packaging, and delay in shipping. All these issues affect the quality of the product, leading to chargeback.
- Consistent Brand Name for Transactions: Set a genuine business name for all transactions, such as customer billing. A name ensures the transaction authenticity so that billing identification is sufficient to justify the deal to the customer.
- Product Tracking and Regular Follow up: Regularly update customers about the product, from placing the order to its delivery. Share details, like the summary, delivery details, delays, and order delivery complete confirmation.
- Efficient E-Commerce Chargeback Management System: A management system that suits the business detects and resolves chargeback fraud effectively. It also guides retailers to choose and to contest disputes.
To summarize, the chargeback dispute is an excellent resource to protect customers from fraud. However, it is a frustrating and time-consuming process from the perspective of the business. If the retailers take timely precautionary measures, it is avoidable, and they can gain more revenue by minimizing it.