In a perfect business environment, you’d be able to take preventive measures that will shield you from having to deal with chargebacks. Unfortunately, they’re now an inevitable part of running a restaurant business.
For some of the merchants, a chargeback may be an occasional occurrence. For a few, it is highly risky because a high chargeback rate can lead to the account being frozen or being listed as a high-risk merchant. While a business cannot be made chargeback proof, we can help you manage the occurrences and assist you in understanding how to deal with them when they occur.
In the previous article, you learned about the various types of frauds and what leads to chargeback. In this article, we’ll discuss the many steps you can take to lessen the number of a chargeback you’ll incur and how to deal with filed chargebacks.
Chargeback resolution for restaurants
There is a standardized process followed to investigate every chargeback irrespective of the issuing bank or credit card provider of the card in dispute.
This process consists of the following steps:
- Initial filing: In most of the cases, the customer must request a refund from the issuing bank to initiate the chargeback resolution process.
- Review: Based on the information provided by the customer, the issuing bank will review the disputed transaction and file a reason code. This will categorize the assumed reason for the chargeback. The customer has the benefit of the doubt, and the issuing bank mostly assumes the customer is telling the truth.
- Investigation: The issuing bank investigates available pieces of evidence and decides whether the claim is valid. Based on the evidence, it issues a credit to the customer and removes the disputed funds from the merchant’s bank account. But the decision is not final yet.
- Processor evaluation: The merchant's processor evaluates the chargeback issue. If the evidence proves that the chargeback is not valid, it will act on the merchant's behalf to invalidate it. Otherwise, chargeback fees will be passed along with all the information they have received to the merchant.
- Merchant review: Now, it’s your turn to review the chargeback and decide to contest the chargeback. Review the chargeback, gather all the evidence to contest. This is the first time in the whole process you will be notified.
- Contest: The processor re-presents the chargeback based upon any additional evidence offered by the merchant. The evidence can be the invoice with time and date stamp, any ID card presented during the transaction, credit card information, or anything else.
- Final decision: The issuing bank reviews all evidence presented and issues a final decision. If the chargeback is invalidated, funds are returned to the merchant.
Chargeback resolution for restaurants
Every chargeback is investigated and resolved following a standardized process, regardless of the issuing bank or credit card association that sponsored the card involved in the dispute.
This process consists of the following steps:
Preventing Chargebacks in restaurants
The chargeback resolution process is designed to work in favor of consumers, but it’s not entirely unfair. Your safest bet is to avoid getting into this circumstance in the first place.
Here are some tips that can help you prevent chargebacks from happening:
- Service: 4% of chargebacks occur because the product did not meet a guest's expectations. If you notice an unhappy guest or receive a complaint, open up the lines of communication and try to quickly resolve the issue before a diner gets to their card statement to deny a transaction. If you think the guest would win a chargeback, offer a refund or a partial refund. In either scenario, a refund is cheaper than a chargeback.
- Gather evidence: Capturing customer information is the best way to prevent chargebacks. The restaurants do not adopt the best practices to capture and record customer Identity cards. The best way to go about this is with a time-efficient, automated, ID scan machine to capture credit card and USDL.
- Communicate with your customers: Many chargebacks can be easily avoided or even rectified if there is open communication between the consumer and the merchant. This works both ways: consumers should always at least attempt to resolve the situation through communication with the merchant before resorting to requesting a chargeback.
- Save all receipts: The statute of limitations for issuing chargebacks vary from provider to provider. However, it can be anywhere from 180 days to three years following a transaction. We recommend that merchants retain their receipts and records in an organized fashion, so they can quickly and accurately provide information upon request.
- Follow card processing protocols: Chargebacks can often be prevented by strictly following basic credit/debit card processing protocols. If a card is swiped or dipped and authorization is denied, do not try to run the card a second time. Swiping or dipping multiple times in an effort to authorize a transaction, manually keying in an entry, or calling for credit approval can all result in a chargeback.
Responding to Chargebacks
When responding to a chargeback, it’s necessary that you act as immediately. There is a time limit in each step of the chargeback resolution process, and delayed action on your part can result in a chargeback loss. Remember that you’re already starting behind the power curve, as you will be the last party involved in a chargeback to receive notice that it has occurred.
A quick response can also resolve consumer misunderstandings. For example, if a customer says he or she never received credit for a return, you can quickly provide proof of the specific day the credit was issued. This action can resolve a chargeback in your favor or even prevent one from being filed if you can communicate with the customer before they resort to filing a chargeback.
While we recommend responding quickly to all chargebacks, we don’t believe you should fight every chargeback. Save your efforts for the situations where you know you can prevail and have the evidence to prove your case.
Using chargeback management platforms
More and more businesses are embracing chargeback management platforms to contest chargebacks. These systems increase operational efficiency in restaurants and eliminate various issues that lead to chargebacks while making it easier to respond.
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