Chargeback and chargeback defense are two of the phrases most retailers dread hearing. They imply that a customer is not satisfied with their services, for whatever reason, and that he demands his money back. The worst part of it all is that defending against chargebacks is nearly impossible. This is why most retailers take steps in preventing reversal claims from clients all together. There are several measures a retailer can take in order to protect himself and his business from these reversals and some of them aren’t even that hard to put into place.
Defining what Is Chargeback?
In the world of retail sales, nothing hurts your business as a customer asking for his money back for a purchase he made. This is because, not only do you lose the money, you lose a customer, you lose your good standing and also it implies other additional costs. This is why retailers usually tend to go out of their way to ensure this does not happen. Sadly, when it does happen, a retailer should know everything there is about how he can come back from a blow like that and what to do in the future to try and avoid them.
Firstly, when a customer asks for his money back on a credit card payment it is called a chargeback . This can happen for a number of reasons. The most frequent ones include the customer changing his mind about a purchase. When this happens there is usually no way to prevent or combat it. The retailer has to simply submit and give the money back. Other times customers can invoke technical problems such as the product delivered not being the one, they ordered or the delivery and shipment not being according to standard. This can mean anything from a late delivery to a damaged parcel. The good news in this case is that the retailer, if he acts fast enough and has all the right paperwork, can actually fight the chargeback.
More recently, one of the most common reasons of chargeback among retail customers is fraud. With companies handling sensitive information, like customer personal information or credit card information, they are a very sought-after target by cyber-attackers. When data leaks and breaches take place, there is little to nothing a retailer can do in order to fight chargeback on the grounds of fraud. The best thing to do in this situation is to try and prevent the leak from happening in the first place. This can be done by implementing strict security protocols for each and every step of payment processing. Luckily there are several solutions in this area that can be used in order to protect both retailers and their customers.
Steps Taken Towards Chargeback Defense
Depending on the bank you work with, your payment processors and many other variables, chargeback defense can be quite different. But in broad strokes, it happens like this:
1. The reversal request is issues by the customer
It is very important for the retailer to get this notification as soon as possible. Time is of the essence in this case and taking the right steps as fast as possible might actually prevent even more reversals from occurring. So, the first order of business is receiving the customers’ request.
2. Actually defending against the reversal
The actual chargeback defense is the next step of the process. Depending on what the motive the customer invokes, the retailer has a very narrow window of time to get the necessary documents to prove the client is wrong. This might go against the age old saying about the customer always being right, but any retailer has to understand that his business is bigger than just one disgruntled client. Invoices, payment receipts, shipping reports and any other papers that demonstrate that the retailer is not at fault are very important to be assembled and presented as quick as possible to the institution in charge of handling the reversal (usually a bank or a credit card issuer).
3. Customer reply
You may find yourself in the not so happy situation of having to defend yourself from the same customer more than once. Your only option in this case is to go out and get even more evidence to prove your case. Although cases like these are rare, they might occur, seeing as how the entire reversal claim system is technically designed to protect the customer more than the retailer.
4. Preventing future claims
In order for a retailer to prevent future reversal claims, he can take some of the following steps:
- Make it easy for customers to get in touch with him in case of any unpleasant event. Always try and deal with the client yourself. If he goes to the bank or the credit card issuer, then you are forced to try and defend your case, which doesn’t always turn out so good for you.
- Have strict order monitoring protocols in place in order to generate comprehensive reports if need be.
- Always make sure that you keep in touch with your clients and check to see if they are satisfied with your services. In the case of chargeback defense, a strong offense is the best defense.
What Can Happen Because of Chargebacks?
The biggest issue any retailer can have with reversal is revenue loss. Aside from the actual revenue he loses from the reversal itself, there are a lot of other fees he has to pay if he cannot defend himself. There are transaction and processing fees that have to be covered by him and even the cost of the defense itself.
Another major drawback reversal bring with them for retailers is the negative image. The more reversal claims a retailer has, the more partners will try to avoid him. Banks, for instance, view these retailers as high-risk and don’t want to have anything to do with them. Having to many reversals can even get a retailer blacklisted for up to 5 years by certain financial institutions and that means higher fees for any transaction he might want to do and even restricted access to some services.
