To proactively reduce or even completely eliminate online payment chargebacks, you need to rethink some of your existing processes and best practices. A few small changes can help reduce handling chargebacks and free up funds and resources that you can redirect towards growing your business. Most of these changes will also improve customer service and loyalty, so it’s in your best interest to adopt these today.
Not Every Chargeback is a Result of Fraud
Let’s start with chargebacks that aren’t due to fraud, or “friendly fraud vs chargeback fraud.” Only about 50% of all chargebacks filed are fraud related so for the other half of your chargebacks you can implement certain customer-facing policies that will reduce the number of chargebacks (and complaints) you’re receiving.
Document Your Orders
The first step for managing chargeback claims is better documentation for your incoming orders and order fulfillment. This will allow you to better prevent chargebacks and to quickly determine if you have the right evidence to win your case against the chargeback claim. You need to know what records your customer’s bank will request, what details you need to capture for each transaction and who will fight the chargeback on your behalf. Keep in mind chargeback disputes can be time-consuming. Without proper records you don’t really have a fair chance and are thus simply a target waiting for chargebacks to erode your margins.
Prevent the Easy Chargebacks by Responding Quickly
Even before a chargeback is filed there are steps you can take to minimize your customer’s chances of filing “friendly fraud” against you. Did you ship you a red shirt to a customer who ordered a blue one? If so, shouldn’t you expect a complaint? And when you receive one are you ready to proactively resolve their issue and get them what they want? If not, you’re inviting a chargeback from this customer as they haven’t received what they paid for and you’re not helping them solve a problem you created. Assuming you have clear documentation of what the customer ordered and when they’re expecting to receive it you should be prepared to understand, accept and resolve any issues they’re facing with their order.
Consider the Lifetime Value for Each Customer
To build upon this further you should consider more lenient customer refund or return policies as well as a promise to fix or replace items broken or damaged during shipping. Not only will this help reduce your customer’s chances of filing a chargeback, it will help build brand loyalty as they’re likely to remember and value the site that took care of them as most companies simply aren’t doing this well. Loyal customers return and buy more as well as refer their friends and families. They also provide positive reviews and respond more readily to promotions. Aren’t these the things you want from your customers instead of chargebacks?
Now let’s look at what you can do about chargebacks due to fraud, where your customer is just as much a victim as you are.
Managing Your Order Review Process
When you detect something strange about an order or a payment method, trust your gut and commit yourself to solving these discrepancies. Too many merchants are simply declining orders that “appear different” to avoid dealing with them and are turning away good customers. We’ve outlined best practices for order review in one of our recent posts that we encourage you to consider. There are many things you can do today to improve your order review process and increase your order approval accuracy.
Consider Posting A Security Badge On Site
Small merchants are often the least equipped to fight fraud and fraudsters know this. This is why any type of fraud attack, (stolen credit cards, hacking your site, etc.) is more likely if you appear small or give the impression that you have minimal protection in place. Posting security badges on your website can deter fraudsters and increase the level of confidence for your customers which provides the additional benefit of potentially increasing sales.
Let Signifyd Eliminate Your Chargeback Risk
Instead of declining orders incorrectly, consider leveraging Signifyd’s instant decisions for your orders to improve order approval accuracy and to protect yourself from chargebacks. Signifyd guarantees every order we approve, so if a chargeback is filed against you, the liability is ours not yours. Since we manage orders for thousands of merchants, we’ve likely seen your customer (or their fraudster alter ego) before you have, so we have more data on each buyer than individual merchants. With Signifyd we provide chargeback fraud protection and your cost for managing fraud is completely predictable.
You’ve built a successful business by providing value to your customers and earning their trust over time. Don’t let chargebacks take that away from you or erode your margins. You can make one or more of these changes today to better protect yourself against chargebacks and you can eliminate chargeback risk completely with Signifyd. We encourage you take a proactive approach for ecommerce chargeback protection to move ahead, not backwards, with your business.
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