Chargebacks are an inconvenience no business owner needs while trying to grow their enterprise. They are costly, and disputing them is a time-consuming challenge, with outcomes usually favoring consumers. The expense of a chargeback goes well beyond the transaction itself, given marketing expenses that went into acquiring that customer, cost of goods and transportation, and fees incurred.
Unquestionably, any company would want to avoid chargebacks. Business owners need to understand why customers initiate chargebacks to minimize them. Here are some common reasons:
Chargebacks for unauthorized transactions
A transaction will return to a merchant marked as ‘fraud’ if a cardholder claims that it was made without authorization. Unfortunately, credit card theft is common, and some purchases are made by people who are not the card’s rightful owners. When a consumer sees the charge, they report it to their bank, which issues a chargeback.
The onus lies with consumers to prove that their card was stolen or used without their authorization. Many websites collaborate with financial institutions to use a two-factor verification process when clients might, for instance, receive an OTP (one-time PIN) on their cellphone before a transaction concludes.
At Accertify, experts use a chargeback management system that helps company owners with SCA optimization for regulatory compliance and simultaneously saves them thousands of dollars in lost sales. SCA (Strong Customer Authentication) processes prevent unnecessary chargebacks, and any costs associated with them.
Chargebacks for unrecognized transactions
A primary cause of chargebacks is an unrecognized transaction. This occurs when a customer sees the deduction from their account and believes that a merchant has made a mistake. They are confused about the transaction and not sure if they authorized it.
This could happen because a family member used their card, they have simply forgotten about the purchase, or do not recognize a transaction descriptor. Ensure that the latter is clear so that customers remember the company and what it is charging them for.
Unfortunately, some credit card users will claim an unrecognized transaction when it did not happen. This behavior is called friendly fraud. An example of such behavior would be a customer who regrets their purchase and wants their money returned.
Instead of contacting the seller to reverse a transaction, they trigger a chargeback. Some customers go as far as waiting until they received their order before initiating a chargeback, making the process of getting purchases back and the other expenses related to a transaction even higher.
Chargebacks caused by poor customer service
Business owners with a high rate of chargebacks need a thorough analysis to discover their root cause. It is common for customers to trigger a chargeback when they are dissatisfied with customer service. For example, if it is challenging for someone to contact a merchant to cancel or return an order, they will elect to use a chargeback. It is faster and more convenient for them.
Business owners should ensure that they offer excellent customer service and remain in touch with clients. Unhappy clients can then return their purchases without a chargeback that is costly to the seller.
Chargeback for inferior quality
If what is delivered to a customer does not meet their expectations based on what the website promised them, they will trigger a chargeback. Again, this is more likely to happen if a buyer cannot contact the merchant to discuss their problem with a product and why they no longer want it.
To prevent such chargebacks, business owners need a high degree of transparency on their website to ensure that customers know what to expect. Additionally, they should use packaging and shipping options that do not cause breakages and other damages to their products.