Addressing chargeback woes: How to deal with chargebacks from non-serious customers?
One of the things businesses have to be wary about is chargebacks. When chargebacks get out of control, you will incur losses, and your brand image may be tarnished among credit card processors and your regular clients as well. In this article, we talk about how to minimize these losses that occur due to chargebacks to operate profitably.
Let's take the example of a club and bar owners. A patron walks into a bar, asks for the bill to be charged against the card. You are justified for charging the expenses on the said credit card. However, the next morning, the same person can raise a dispute against the transaction, citing fraud or redundancy in sales, thus causing you a financial loss.
As a patron, chargebacks are as good as a free lunch, but for business owners, it is the thin line of difference between a profit and loss. At the current rate of chargebacks, the losses are expected as much as $25 billion by 2020 annually!
Here is the industry average for chargebacks
So, how can you go about preventing chargebacks?
Small business owners who accept card payments should be aware of how chargebacks work. Understanding some common reasons will help you prevent chargebacks.
- No cardholder authorization
- Illegal transaction
- Expired card
- Goods/services not supplied
- Transaction over floor limit without authorization
- Processing offline when terminal working
Address customer dissatisfaction on priority
Firstly, as a seller, it is crucial to get your basics right. Swift addressing customer issues concerning a transaction is a primary step to prevent the chargeback. Although you may respond to chargebacks on time, the card network might still put you in a monitoring program. It becomes necessary to avoid chargebacks in the first place.
Use reputed payment gateways
Secondly, having a reputed payment processing gateway that eliminates redundant or faulty transactions can reduce the woes of the chargeback. A study reveals that 3% of all chargeback disputes arise from repeated payments, and therefore, a reputed payment gateway is essential to address the basics.
Encourage feedback collection
Be proactive and collect feedback when the customer is in your venue. The collection of feedback helps you identify an issue and settle the transaction immediately. Also, sharing your contact information will help the customer get in touch with you in case of a wrong charge.
Use of advanced technology
For starters, the seller could go for an identity scanner app.
An identity scanner app helps a quick scanning of your customer's identity card in real-time. When your customer walks into your vicinity, be it a store, club, or any other retail entity, you can capture all the necessary data at once. At the time of a chargeback dispute, this information can be critical, for it establishes the presence of the customer at your venue. Given every third chargeback is contested against a stolen credit card, having an ID that links back to the card can be critical in arriving at a quick resolution.
However, even with all these measures in place, you could be fighting a chargeback due to 'buyers remorse.' When you take pride in offering outstanding service, receiving a chargeback can be frustrating and seemingly unfair - remember that incurring chargebacks are a necessary requirement of accepting credit cards; no one is immune. This is where employing some best practices can go a long way in securing profits and eliminating unwarranted losses for your business.