Chargebacks were created to help consumers protect themselves from fraud, but sometimes they are abused. Chargeback fraud has become a common problem for online merchants. As the payment industry straddles the line between protecting consumers and businesses, they have begun to issue changes to the chargeback process.
Payment service providers continue to tighten controls around chargebacks, leaving merchants in need of better ways to protect themselves. One way to protect your business is to know what your rights and responsibilities are when it comes to chargebacks, but this can be difficult. Each payment service provider, gateway, and acquirer often has their own rules around merchant expectations. However, there are some commonly used terms that are universal.
Use Preventative Measures
Keeping fraud from occurring in the first place is always the best way to prevent chargebacks. No fraud prevention can eradicate all fraud, however. That means it’s extremely important to choose the right one. Look for fraud solutions that offer multiple verification tools and protection from several forms of fraud.
You’ll also want to ensure that any customer data stored on your site is secure and protected. Require customer accounts to have strong passwords and consider 2-factor authentication on unknown devices. Setting strong fraud protections in place right from the start can help you keep chargeback costs low, gain support from your payment service providers, and fight unwarranted chargebacks in the future.
Have Organized Processes
When it comes to disputing a chargeback, you’ll need clean records. Having clear information can help you reduce friendly fraud in addition to showing any potential weaknesses in your fraud prevention that can later be strengthened. You should also be able to respond quickly with complete information about the order in question. Since many chargeback processes have very strict time requirements, an organized, prepared process will ensure that you can meet these timelines and avoid losing more money from inefficiencies.
Know Your Dispute Rights and Responsibilities
Do you know Visa charges merchants a small fee for unacknowledged chargebacks? Do you know what your arbitration process is? Knowing what is required of you, how the entire process works, and what the terminology is can also help you avoid many fees and additional costs. Because there are a variety of payment methods – and each may have its own process for handling chargebacks – this may require some research. But that research will pay off by putting you in a better position to understand and protect yourself from fraudulent chargebacks.
Get More Information
The best place to go for information on the chargeback process as well as any changes is usually the source. Make sure to ask your acquirer for their specific requirements. Here are a few guides from some well-known payment service providers to get you started:
Visa Chargeback Management Guidelines Mastercard Chargeback Guide American Express Guides (you must log in to download the Complete Disputes Guide) PayPal Resolving Disputes, Claims, and Chargebacks