When transactions go up, generally, so do the number of chargebacks merchants see. This is just one of the natural consequences of surging sales volumes, which can lead to more missed deliveries and defective products reaching customers. Some shoppers also simply change their minds about their purchases.

Ultimately, chargebacks aren’t a new thing for merchants. However, since the onset of COVID-19, we’ve seen merchants across all segments experience more chargebacks for any number of reasons. In this article, we discuss the main drivers behind this trend and lay out what merchants can do to stop losing money. 

Why Have Chargebacks Increased in the Last 18 Months?

In simple terms, a chargeback is the reversal of a credit card payment that comes directly from the bank. They’re different from traditional refunds in that customers don’t contact the merchant first and instead request that their banks forcibly recover the money for them. A few reasons this has occurred more since COVID-19 are:

  •  As more people than ever shop online, ecommerce fraud and identity theft have been on the rise. This has led to many victims of these attacks issuing chargebacks with their banks in response to suspicious and fraudulent payments made on their cards.
  • The pandemic forced many people to change their travel plans and cancel their flights and accommodations, among other things. 
  • The disruption of supply chains has caused extreme delays. Many customers waiting for expensive electronics or goods imported from abroad have issued chargebacks with their banks.  
  • The pandemic forced many older individuals who are less familiar with the internet and ecommerce processes to shop online out of necessity. This lead to a number of mistakes and disputes; with some individuals even resorting to chargebacks to resolve their purchase issues, not knowing (or wanting) to first send merchants a complaint or request for resolution first.

How to Reduce Chargebacks 

One of the most common reasons for chargebacks is a “merchant error.” By implementing a few changes on your ecommerce website and processes, you can reduce many unnecessary chargebacks from occurring.

  1. Make sure all essential contact information is prominent on your site so that customers will get in touch with you rather than issue a chargeback with their bank
  2. Invest in human customer service at key stages in the customer journey and post-purchase phase. If people merely encounter an AI-bot or recorded voice, they’re more likely to issue a chargeback
  3. Reply to all correspondences promptly and set up an auto-reply letting customers know when your operating hours are and when they can expect to be contacted
  4. Create a simple and straightforward terms of service for your transactions and policies, so customers don’t get confused.
  5. If you offer recurring billing, make it easy for customers to opt-out when they stop using your service or receiving your products
  6. Build a reliable refund and cancellation process that gives verification to customers clearly and promptly
  7. Follow best practices for post-purchase communications, such as clear delivery estimates and updates about shipping delays
  8. Make sure all your product descriptions are accurate and do not lead to claims that your product or service does not match up to your customer’s expectations
  9. As you can see, there are many potential triggers that can lead to chargebacks, but by making a few small adjustments, you can mitigate some of the most avoidable causes.

Stamp Out Criminal Fraud Chargebacks

Ecommerce merchants stand to lose roughly $20 billion in 2021 due to criminal activity, according to a study released by Juniper Research. This is partly a result of criminal fraud chargebacks, which are harder to prevent than merchant errors.

Ultimately, you will need to work closely with your payments services provider to implement a reliable fraud prevention strategy. This includes looking for signs that fraud is taking place to intercept threats, as well as protecting yourself with the right level of payment security through CVV verifications, 3D Secure technology, and more.

Having these key tools at your disposal will help to protect you in more ways than one. You can safeguard your customers’ payment data while significantly reducing the chance of chargebacks from happening.

Learn About Our Protect Service at APS!

What Is Friendly Fraud?

Friendly fraud occurs when a customer contacts their bank to chargeback a card purchase by claiming they don’t recognize a payment. They then go ahead and keep the goods they bought without paying for it. Some do this by mistake (if they’ve forgotten they’ve purchased something), while others do it intentionally.

You can prevent some cases of friendly fraud by creating recognizable and indisputable billing descriptors. When banks see these terms or phrases, combined with the history of someone who may commit friendly fraud frequently, they will be less likely to initiate the chargeback that has been requested.

In other cases, having a clear descriptor will jog someone’s memory about an old purchase, so that the next time they see a suspicious transaction on their statement, they won’t automatically assume it’s an unauthorized purchase.

As such, you’ll want to use something that is directly relatable to your business and consider adding your website address and phone number. If your trading name differs from your legal name, use the option that customers will recognize more.

Build a Chargeback Prevention Strategy

Chargebacks are a necessary function for customers to protect themselves from fraud. However, there’s no denying it can be extremely detrimental to merchants if they’re abused or happen too frequently.

If you haven’t done so already, make sure you build a strategy for protecting yourself against the increased level of chargebacks affecting thousands of businesses throughout MENA today! 

 

Nada Marzouk