Secure Your Reputation as a Business: Top 6 Chargeback Prevention Strategies
Chargebacks are arguably the most-feared evil in the realms of fintech and retail. The seemingly innocuous payment reversals can drain your funds and get you out of favor with banks. While business owners seem to be largely uncertain as to whether chargeback protection is economically viable, we insist that it is. Much more than that, it is indispensable if your ambition is to grow a solid, trusted business. We have therefore, brought you six effective chargeback fraud prevention techniques to keep your chargeback rate under control.
Defining chargeback fraud
Chargeback is an automated return transaction initiated by the customer’s bank to refund a purchase that did not take place or was found unsatisfactory. Originally designed to ensure that consumer rights are observed, the process has become central to numerous fraudulent schemes. Deception can be deliberate or inadvertent, including cases where customers fail to remember making a purchase, or don’t want to wait for an overdue delivery.
Businesses normally try to reduce their chargeback rate to a minimum. This is done to prevent negative consequences of too-frequent refunding, including the following:
- Loss of money due to transaction processing fees and investigation costs.
- Reputation loss in case the customer takes the refund for proof that you are “guilty.”
- Increased fees on the part of partner financial institutions once the limit is exceeded.
Steps to take
While it’s not legally possible to declare that chargeback is not an option, you can significantly improve your standing if you take measures on a number of levels.
- Maintain consistency
It’s not uncommon for buyers to see an unfamiliar vendor name next to a transaction and claim a refund before they can identify that with the store they visited the other day. Comical as it may sound, it can still affect your profit and reputation. Having the same name legally and on your signs is a great prevention strategy in this respect.
- Use technology to your advantage
Today’s market offers you a range of smart solutions to the chargeback problem. Probably the most promising approach is to have your security system alert you of any chargeback requests from your customers so you can respond before their banks initiate a refund. Such negotiations are a good chance to show your commitment and avoid the undesirable official procedure.
- Make sure your policies are transparent
Sometimes high chargeback rates are caused by customers’ unwillingness to return goods, which in turn is often due to vague and confusing policies. Your second highest-return investment in chargeback prevention after dedicated technology, is well-written terms and conditions that make it clear to everyone in your target audience how to proceed if they are not happy.
- Be ready to stand behind your quality
This is a simple, yet powerful rule. If you only provide high-quality goods that fit their description exactly and arrive on time, the number of chargeback cases will almost surely plummet. At least it will be lower than with average quality and delivery patterns.
- Show your customers proper care
Promptly respond to queries, requests, and complaints from your customers to make sure a near-chargeback incident doesn’t go unnoticed. When the return transaction has taken place, it is generally too late.
- Keep good records
A small yet powerful step, would be to meticulously record all your sales. If you have gap-free records, you’ll be able to prove that a deal did take place and provide any explanations needed.
Minimize the risk you cannot eliminate
While chargebacks cannot be avoided altogether, there is nothing to prevent you from reducing their rate to an acceptable level. Try a combination of the above strategies to ensure a less risky and stressful experience for both yourself, and your customers.
