The Ultimate Guide to Credit Card Chargebacks

What is a Chargeback? The Ultimate Guide to Credit Card Chargebacks.

Every industry working in the online business is in reach of Chargebacks. It has become an important part of companies in the digital world. Understanding the issue of chargebacks is vital, and so is fighting against it.

“81% of customers admit to ‘convenience’ as their primary motivator when it comes to filing a chargeback.” (Expert Market)

That shows how vastly convenience affects a business. However, what’s more, is the concern regarding Chargebacks. There are multiple reasons for filing a chargeback, but a company’s loss is quite massive.

Merchants lose around 2.4 percent for every Chargeback. Cumulatively, the chargeback hits hard to the financials of a company. The online segment of a business suffers a lot.

What are Chargebacks?

Chargeback is returning specific funds to the consumers after a successful dispute. The design of Chargebacks comes from 40 years ago to provide convenience to consumers. It provides security to consumers from identity theft and fraud. Chargeback is the process of payment reversal to the consumer.

Card Authorities are the ones offering enhanced services to the consumers. In other words, they are the ones that provide the chargeback issuing solution. It is mainly for Debit and Credit Card Holders.

There are a variety of reasons for filing a chargeback. The card-holders get advance security from card fraud or identity thefts. The credit card holder will have a particular time frame to raise a dispute, commonly known as Chargeback Period. The dispute against a charge requires a thorough inspection.

Furthermore, there will be various proof requirements too.

What is the Issue With Chargebacks?

The major chargeback issue lies in the fact that a chargeback causes a loss of more than Two times the cost. Furthermore, sometimes, the chargebacks aren’t real indeed. That brings in the issue of friendly fraud.

What are Friendly Frauds?

Friendly frauds are a type of chargeback wherein consumers flag disputes even though they got the correct goods or services. In this case, the merchants lose an ample amount financially and the product or service.

Friendly frauds are dangerous for a merchant and create a massive mess.

“86% of chargebacks are fraudulently placed, skipping the merchant & going straight to the chargeback process” (Global risk Technologies)

Thus, the merchant cannot track the fraudulent activity effectively. It is due to the lack of information and channeling of the chargeback. The consumers skipping the proper process are fraudulent in most cases.

Only 14% of the consumer takes the proper channel of refunds. It hampers the business as it loses its reputation. The associated bodies tend to put the company on a caution list due to the higher chargeback ratio.

The Cause of Friendly Fraud

What allows friendly fraud to take place? The fact that frauds are prevailing should raise concern among the banks. That brings in the question of why there is no change in the process?

The problematic idea is rooted deeply in the channel of chargeback. The concept of a chargeback, no doubt, gave power to the consumers. However, it never thought about the state of the merchant. The independence and financial power of consumer-centric finance were good 40 years back.

But today, the payment system has changed. Furthermore, the payments are on the verge of massive changes today. Digital Payments are soon going to the evolved present rather than the future. Still, the chargebacks remain a consumer-centric solution.

It is also true that payment service providers traditionally work in low to medium-risk businesses to provide a solution. Yet, the High-Risk Businesses has no such service. In those cases, the suffering party remains the merchant.

Can a business fight it?

Fighting chargebacks is a huge task to undertake. A merchant needs to dedicate time to fight a single chargeback. They have to provide ample documents and information for proving that it wasn’t a real dispute.

In that case, the chargeback goes null and void. However, most merchants don’t get to have access to this information. The huge area of online transactions provides the least surveillance and information to the merchants. Chargeback uses that particular loophole to provide a profound solution to the consumer.

However, there are service providers that offer precise support to the merchants. There are three types of chargeback protection services.

The Chargeback Protection Services for Merchants

The three types of chargeback protection services are:

  1. Alerts for Chargebacks
  2. Chargeback Management
  3. Complete Chargeback Protection

Chargeback Alerts

Chargeback alert is a small window chargeback protection service that allows the merchant to offer a refund. Generally, the window is of 24 hours to either collect all the data against the chargeback or provide a refund.

It depletes the chargeback rate of a company and makes it quite easy for the merchant to work. However, the window is small, and there is not much to do if the chargeback is on the verge.

Chargeback Management through Deflection

Fraud prevention companies work with advanced technologies to provide solutions to the merchants. Payment Service Provider offers tech-driven solutions to the merchants with the companies’ tie-up.

These management services provide a linger window and offer profound solutions to the merchants. The use of information and data becomes feasible with the Fraud Scoring into account. Furthermore, the dashboard gets you the information to have the best choices.

Complete Chargeback Protection

Last but not least are the complete chargeback protection services by a Payment Service Provider. It offers an advanced solution to a merchant by covering the cost of the chargeback. In other words, the PSP covers the complete cost of the chargeback.

Only the experienced and big service providers offer this type of solution wherein the merchant is protected. There will be no need to run here and there for the chargeback. All the service provider does is taken a small charge from the merchant as security.

The Final Verdict

In conclusion, the issue of chargeback prevails for merchants around the globe. Getting a payment service provider with extensive knowledge becomes quite important. However, there is no way to reduce the chargebacks to complete zero. A thing or two will slip out of the nook and crannies to create a problem for Merchants.

However, as more and more merchants get to be aware of chargebacks, the better it will be for businesses. Offering refunds to consumers and keeping an easy link with them becomes crucial. In other words, if there is an easy channel for the consumer to reach the merchant, why will there be any chargeback.

However, friendly frauds are a concern to every business and that requires solutions that dedicate the payment processing.

What does eMerchantPro have to offer you?

eMerchantPro is a Payment Service Provider with tonnes of experience in the High-Risk Business sector. In other words, eMerchantPro provides a precise payment processing solution. Your business gets to step into the digital marketplace with eMerchantPro Payment Gateway and Merchant Account.

Furthermore, eMerchantPro keeps chargebacks away from your business. In other words, it provides Complete Chargeback Protection to Merchants around the globe. That means there won’t be any problem with the Chargebacks and Financial Reputation. The complete chargeback protection services will resolve the problem with online payments and chargebacks.