Ebook

The Ultimate Guide to Reducing Chargebacks

Accepting payments worldwide and at all times has tons of advantages, but chargebacks are without a doubt the most negative consequences of working in the card-not-present space. However, there are steps anyone can take to decrease those rates. This ebook will dive deep into the technical processes of chargebacks and explain how to implement the right solutions to eliminate them.

1. Chargebacks: a Definition
2. The True Cost of Chargebacks
3. What Makes a High Fraud Target
4. How Credit Card Details Are Stolen
5. Customer Friction vs Trust
6. Preventing Chargebacks Before They Happen

The Ultimate Guide to Reducing Chargebacks

Chargebacks: a definition

Chargebacks are a protection designed to help customers. When someone maliciously used their card without their knowledge (or they are dissatisfied with a product they bought online or over the phone), they can claim a forced reversal of funds to their bank account – or chargeback.

The funds have to be taken from the merchant’s account, and sent back to the customer. This can take weeks or months and cost a great deal in administrative fees, which are always passed on to the merchant.

1.1 KEY PLAYERS IN THE CHARGEBACK PROCESS

To understand why chargebacks are so expensive, it helps to see who is involved in the process:

  • Buyer, or customer: the person who files a chargeback request. We’ll go into the numerous reasons later.
  • Merchant: the online store or business that sold the goods or services. They can either accept the chargeback, or fight it through a dispute.
  • Issuer: The bank connected to the buyer’s credit card.
  • Acquirer: The bank or financial institution that processes card payments for
    the merchant.
  • Payment Gateway: the software used to transfer transaction data from the merchant to the acquirer.
  • Credit card company: The organization that oversees the whole chargeback process. As we’ll see, major credit card companies have different procedures for dealing with chargebacks.

1.2 ANATOMY OF A CHARGEBACK

The positive consequence of having so many parties involved is that any of them can prevent or dispute a transaction if it looks suspicious. Unfortunately, this sometimes leads to false positives, which are frustrating for customers.

The True Cost Of Chargebacks

Chargebacks add insult to injury for retailers. They lose a sale, a physical or digital item, and have to pay a fee of $20 – $100. It can even incur penalties if it happens too often. Failing to meet card company’s requirements for chargebacks means merchants will be considered high-risk, fined, and in extreme cases, prevented from accepting the company’s payments altogether.

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