A chargeback is a dispute between a customer and the business. In this video we explore what a chargeback is, and some of the reasons that chargebacks occur.
If you get too many chargebacks your merchant account can be shut down. In this video we explore what you should do to keep your account in good standing if you've been targeted by fraudsters and suddenly start receiving a lot of chargebacks.
Card testing is an increasing problem for #ecommerce merchants. Fraudsters are constantly looking for ways to test cards. It's even a problem for payment processors, Visa and Mastercard. In this video David explains what card testing is, why fraudsters do it, and how to stop it, in addition to advice on how to get some of the fees reversed when it occurs.
Hello, David here at Merchant-Accounts.ca. Today I'm going to tackle a very frustrating topic. Sometimes it's infuriating. What do you do when you get a chargeback and you lose it and it's completely unfair? What's left? Stay tuned, I'm going to do my best to help in one second.
In the past the best way to manually screen suspicious orders was to call the customer on the phone and ask them questions. Now, with modern web based video technologies it's possible to validate customers in a way that was never previously possible.
Visa is addressing some of the most common chargeback related complaints from merchants. Going forward, chargebacks are a thing of the past and will now be known as disputes.
A positive AVS result is an indicator of a legitimate transaction. In this short explainer video David explains what AVS is, how it works, and things to be aware of when relying on an AVS security result for any particular order.
David explains what two factor authentication is, how it works, and how it shifts chargeback risk for fraud onto the card issuer and away from the merchant.
How does Visa and MasterCard chargeback arbitration work? When a merchant has fought a chargeback and lost there is still one more chance to turn it around by taking it to the card brands for arbitration.
There is a strong argument that 3DSecure (version 2) is the single best anti-fraud tool available to any online merchant. In this video David explains what 3DSecure is, how it works, how you set it up on your website, and different ways that it can be configured.
Pre-authorizations are one of the best tools available to prevent fraud. A pre-auth will enable you to return security results for the order, such as AVS and CVV security checks. More importantly, it gives you a chance to evaluate the order and determine if you want to accept the sale. You are fully protected because you can't get a chargeback until you capture the funds from the pre-authorization.
The first in our fighting chargebacks series concentrates on fighting fraud reason code chargebacks. For e-commerce and card-not-present merchants fraud chargebacks are usually the hardest ones to win. The challenge is that you have to prove the cardholder is who they say they are, and that they actually ordered the item or service in question. It's a very uphill battle if you try to combat fraud it after the dispute has already been received. With this reason code, you really do need to take a preventative approach. The purpose of this series is to give business owners an idea on the best way to respond to certain types of chargebacks, but for fraud in particular - the battle is mostly won prior to you even shipping the order. Ultimately, if the cardholder didn't actually buy the item or service in question you can't win, so in this discussion David also talks about ways to validate orders.
How to lower your chargeback ratio
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
Ideal Chargeback Threshold
Merchants should aim to keep their chargeback threshold below 1%.
2
Proactive Customer Communication Reduces Disputes
Maintaining clear and timely communication with customers can prevent misunderstandings that lead to chargebacks.
By promptly addressing customer concerns and providing detailed product or service information, merchants can foster trust and reduce the likelihood of disputes.
3
Consider creative solutions
Implementing basic anti-fraud methods like 3D Secure and AVS can prevent fradulent orders.
However to go beyond this and help eliminate friendly fraud which may successfully navigate this first level of security,
merchants may employ other creative stratgies such as offering a complimentary service which customers would be unlikely to dispute.
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Hello, David here Merchant-Accounts.ca. Today I'm going to talk about what you can do to reduce chargeback rates and improve your statistics. Stay tuned, we'll dig in in one second.
Chargeback Thresholds
Now, I've produced other content on the Visa, MasterCard, and chargeback thresholds, and you can find that information on the Merchant-Accounts.ca YouTube channel. If you want all the details, you can dig into it. If you're not familiar with it, I suggest that you do. On a high level, as a merchant, you have to keep your chargeback rates under 1%. In this video, what I'm going to discuss is a strategy that some businesses can employ to help you achieve this and come in under those thresholds.
Some businesses have higher chargeback rates
Now, some types of products or services are simply going to have more disputes than others. Now, in my left hand here, I have a can of delicious cranberry ginger ale, it was wonderful. I also might have purchased speculative crypto moneymaking investment advice, you know, paper. Now, which of those two things am I more likely to potentially be unhappy with? If we're willing to acknowledge that some businesses have more disputes than others, then what can you do if you have a business that tends to get too many chargebacks?
Friendly fraud
In this discussion, I don't want to center on fraud, there are so many modern tools for fighting fraud like 3D Secure. What I want to talk about today is friendly fraud card holders are now using other dispute reason codes to win a chargeback, whereas before they might have just claimed, hey, I didn't authorize this transaction. Since that's no longer possible, cardholders are claiming other things, like hey, I didn't get what I was promised. They might bend the rules in some cases, but they still get to do the chargeback, which is a problem for you, the merchant.
Complimentary Service
This doesn't have to be a complicated video. I can get to the bottom line pretty quickly. Why don't you find a complimentary service product or service that's related to what you sell? It costs less money and you can use this product or service to help adjust your chargeback thresholds.
I'm going to give an example. Let's say you have an electronics repair business that specializes in really difficult-to-repair electronics. Your policy might be, okay, send it to us, and we're going to charge a $100 fee. We're going to spend up to an hour and a half looking at it. If it's repairable after that, it'll cost you the parts plus $50 per hour to fix. In some cases, people are going to send stuff in that's beyond repair, and those customers might end up charging it back even though your policy was reasonable and clear. Now, in this example, there are probably a couple of things you could do, but what I'm talking about is adding a new product or service line that's less likely to result in a chargeback. For example, you could add a new $5 service where you get on the phone with the customer or a Google Meet or something and they show the item and you talk about it to help them determine if it's likely able to be fixed. Now, most people won't bother charging back a $5 transaction. For every $5 transaction that's not charged back. It's improving your stats and chargeback ratios. It's important that it has to be a real legitimate service. However, if you can generate a lot of sales for this new service that doesn't get charged back, it's going to massively help your overall stats. Now, this is a good strategy for any business that deals with unreasonable customers.
Another example might be people who are purchasing something about filing for bankruptcy. Now, these folks are more likely to do a chargeback simply because they're hard up for cash. Now, it doesn't make it right if they file an unreasonable chargeback, but this might be the reality of your business. If you can find a service for them that provides a ton of overwhelming value for a very minimal cost, they're not going to charge it back.
I do admit that this video is kind of living on the edge of the type of advice I give, and it's not for every business. However, I have to acknowledge some people do have businesses that just get more disputes and they're very legitimate businesses. It's just their product line, and it's very hard. I often find it has to do a lot with the demographics of the customer base of these merchants. In that case, what are your options? You can try to change the habits of your customers. That's pretty much impossible. You can change the demographics of your customers. In other words, change your customer base, but your business might not allow for that, or you might just provide something of overwhelming value that they hopefully won't charge back, which I think is a good strategy. As I said, this won't work for every business, but I'm certain there are some businesses out there that could benefit from it.
Summary
In summary, if you have a high chargeback type of business or high dispute type of business, try to find a related product line that you can sell, hopefully, a lot of for our transactions that won't resolve in a dispute. It's very simple, but a lot of people do not think of this. With that, I think I've covered the base for this topic. If you have any questions, reach out to us at Merchant-Accounts.ca and I thank you for watching. Have a nice day. Bye now.
A chargeback is a dispute between a customer and the business. In this video we explore what a chargeback is, and some of the reasons that chargebacks occur.
If you get too many chargebacks your merchant account can be shut down. In this video we explore what you should do to keep your account in good standing if you've been targeted by fraudsters and suddenly start receiving a lot of chargebacks.
Card testing is an increasing problem for #ecommerce merchants. Fraudsters are constantly looking for ways to test cards. It's even a problem for payment processors, Visa and Mastercard. In this video David explains what card testing is, why fraudsters do it, and how to stop it, in addition to advice on how to get some of the fees reversed when it occurs.
Hello, David here at Merchant-Accounts.ca. Today I'm going to tackle a very frustrating topic. Sometimes it's infuriating. What do you do when you get a chargeback and you lose it and it's completely unfair? What's left? Stay tuned, I'm going to do my best to help in one second.
In the past the best way to manually screen suspicious orders was to call the customer on the phone and ask them questions. Now, with modern web based video technologies it's possible to validate customers in a way that was never previously possible.
Visa is addressing some of the most common chargeback related complaints from merchants. Going forward, chargebacks are a thing of the past and will now be known as disputes.
A positive AVS result is an indicator of a legitimate transaction. In this short explainer video David explains what AVS is, how it works, and things to be aware of when relying on an AVS security result for any particular order.
David explains what two factor authentication is, how it works, and how it shifts chargeback risk for fraud onto the card issuer and away from the merchant.
How does Visa and MasterCard chargeback arbitration work? When a merchant has fought a chargeback and lost there is still one more chance to turn it around by taking it to the card brands for arbitration.
There is a strong argument that 3DSecure (version 2) is the single best anti-fraud tool available to any online merchant. In this video David explains what 3DSecure is, how it works, how you set it up on your website, and different ways that it can be configured.
Pre-authorizations are one of the best tools available to prevent fraud. A pre-auth will enable you to return security results for the order, such as AVS and CVV security checks. More importantly, it gives you a chance to evaluate the order and determine if you want to accept the sale. You are fully protected because you can't get a chargeback until you capture the funds from the pre-authorization.
The first in our fighting chargebacks series concentrates on fighting fraud reason code chargebacks. For e-commerce and card-not-present merchants fraud chargebacks are usually the hardest ones to win. The challenge is that you have to prove the cardholder is who they say they are, and that they actually ordered the item or service in question. It's a very uphill battle if you try to combat fraud it after the dispute has already been received. With this reason code, you really do need to take a preventative approach. The purpose of this series is to give business owners an idea on the best way to respond to certain types of chargebacks, but for fraud in particular - the battle is mostly won prior to you even shipping the order. Ultimately, if the cardholder didn't actually buy the item or service in question you can't win, so in this discussion David also talks about ways to validate orders.
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My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
