How To Reduce Dispute And Chargeback Costs In Digital Commerce Fraud Detection

Chargebacks are an e-commerce merchant’s worst nightmare. Due to the higher risk of fraud in card-not-present transactions, these merchants are subjected to it more frequently and have more obstacles in combating them. While retailers may still fight chargebacks and get them overturned, the best cure is to prevent e-commerce chargebacks altogether.

How do we reduce dispute and chargeback costs in e-commerce fraud detection? There are a lot of ways to avoid e-commerce chargebacks, but the first step is to figure out the cause. This will assist you to determine where you should concentrate your chargeback prevention efforts. Once you’ve done that, you can use a variety of tactics in combination to address the issues you’re having and lower your chargeback rate.

How Can Merchants Prevent E-commerce Chargebacks?

How do you reduce chargebacks on e-commerce? E-commerce merchants can avoid chargebacks through powerful fraud prevention, available and helpful customer support, and deflection tools like chargeback notification and Order Insight.

Preventing chargebacks is a project that might encompass a number of different ways, rather than a single operation. Merchants who want to take their chargeback problem seriously should hire a chargeback management agency, which may provide expert advice as well as a number of services aimed at reducing chargebacks and recovering income.

For the time being, however, here are seven simple ways merchants can reduce chargeback fraud in e-commerce:

  • Follow payment processing protocols
  • Use a recognizable merchant descriptor
  • Offer available and helpful customer service
  • Use effective fraud prevention
  • Maintain complete records for representment
  • Set realistic expectations for your customers
  • Use tools to deflect disputes

We’ll go through each of these in greater depth later, but first, a refresher on chargebacks for those who are unfamiliar with the concept:

What Are Online Payment Chargebacks?

Online payment chargebacks happen when a consumer contacts their bank to dispute a charge on their account. A chargeback will be filed if the bank approves the dispute, and the money will be taken from the merchant.

Chargebacks are used when a cardholder has been a victim of fraud in some way, such as a stolen credit card or a dishonest merchant. Unfortunately, the procedure isn’t usually followed to the letter. Online payment chargebacks are fairly widespread, owing to the ease with which fraudsters can get payment information or login credentials without the victim’s knowledge.

Merchants have a range of tools at their disposal to assist them prevent chargebacks on online payments, and any merchant who accepts online payments should be familiar with fraud and chargeback prevention best practices.

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Follow Payment Processing Protocols

For card-not-present transactions, each card network has its own set of protocols. You may need to collect data such as the customer’s IP address, perform AVS and CVV verification, or receive proof of delivery.

You can screen out fraudulent transactions before they’re even completed if you follow the right protocols. If you ignore them, the card network may automatically rule against you if you have a chargeback dispute.

Use a Recognizable Merchant Descriptor

When a customer sees a transaction on their credit card account that they don’t recognize, they instantly report it to their bank as a suspicious payment.

Even if the consumer learns the charge is related to a transaction they made, it may be too late to avoid the chargeback being logged against your merchant account.

Make certain that your merchant descriptor is easily recognizable by your clients. For example, if you do business under multiple names, make sure that the firm name on the merchant description matches the name of your online storefront. Ensure to provide a working phone number in the description so that people can call you before going to their bank.

How Can Customer Support Prevent Chargebacks?

Some chargebacks can be avoided by providing excellent customer service. There will be no need for a chargeback if clients can easily contact you and you make every effort to provide an acceptable solution. In almost all cases, a direct refund will be less expensive than a chargeback.

Friendly fraud chargebacks are very common in online subscription services. Many customers forget to cancel subscriptions before free trial memberships expire, or they let unused subscriptions continue for an extended period of time before panicking and racing to their banks to try to reverse months’ worth of payments all at once.

Customers should be able to cancel subscriptions easily, and merchants should be fair with reimbursements for customers canceling subscriptions they haven’t used in months. If consumers who forget to cancel are aware that they may contact you for a refund, you should see fewer chargebacks.

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How To Reduce Dispute And Chargeback Costs In Digital Commerce Fraud Detection

How Can Fraud Prevention Reduce Chargebacks?

Since almost every occurrence of actual fraud results in a chargeback, bolstering merchants’ fraud prevention measures is one of the most effective strategies to lower the amount of chargebacks they receive.

These days, there are types of fraud prevention tools available to merchants, including two-factor authentication, device fingerprinting, velocity checking, and tools that use machine learning to identify potential fraud.

Even if you don’t have access to the most powerful fraud detection systems, there are often red flags that can be used to identify questionable orders and evaluate them more thoroughly.

Foreign orders, particularly those from countries where credit card theft is common, should be carefully investigated since they can often conceal e-commerce security issues. Unusually large orders, or anything that isn’t a “typical” purchase for your business, should be investigated further. Multiple failed order attempts from the same customer or IP address are a clear indicator that someone is trying to buy some items with stolen credit cards.

When you suspect a purchase is shady, you can usually contact the cardholder to check if it was them who made the purchase.

Keep complete records for representation

Keep track of all the information you get when an online order is placed, shipped, and delivered, and make backups of it. If you have to defend a chargeback, this information will be important in proving that the transaction was valid and completed correctly.

Set Realistic Expectations With Your Customers

While it’s natural to portray your company in the best light and extol the virtues of what you have to offer, you don’t want to exaggerate to the point of disappointing your clients. Be careful of the gap between what you’ve established in terms of expectations and what your products or services can actually do.

Customers may feel misled if you promise more than you can deliver. Once you’ve lost their trust, they’re more inclined to file a chargeback with their bank rather than try to address their problem with you.

Make sure your online ordering system is set up so that your customers can read all of your return, exchange, and other relevant policies before confirming their purchase. Being entirely open and clear about your policies will help your consumers avoid confusion and provocation, as well as help your case if you have to challenge a chargeback.

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What Tools Can Merchants Use to Deflect Disputes?

Some complex tools allow merchants to intervene after a client has called their bank to dispute a charge but before a chargeback occurs. Chargeback alerts and Order Insight are two systems that can help you avoid chargebacks by offering refunds or additional information. Chargeback prevention alerts momentarily “pause” the chargeback to prevent it from growing into a chargeback.

When a cardholder files a dispute with their issuer, the merchant receives a chargeback alert and has the chance to issue a refund before the chargeback is filed.

Order Insight can also be used to provide more details about transactions with issuing banks, assist customers in recognizing charges and assisting banks in identifying false claims.

These tools, however, will not totally protect your company. Identifying the basic reasons for your chargebacks can expose any operational inefficiencies in your company and what you can do to fix them, preventing future chargebacks.

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