Chargeback Prevention and Why Your
Merchants Need It
Chargebacks cause rather significant revenue losses and can even lead to merchant closure, so
it’s best to prevent them.
In this article, we will deepen our knowledge about chargebacks as well as explore the efficient
ways to prevent them.
Running a business is a challenging task. Companies face various daily threats that endanger their financial stability and smooth development. One of the common frustrating problems the merchants face online is chargebacks. These financial disputes cause a lot of headaches and can result in significant monetary losses. However, there are efficient strategies that help merchants prevent chargeback disputes. In this article, we share valuable information on chargebacks and give practical tips on how to prevent chargebacks as a merchant that will benefit every business, from big to small, from experienced to new.
What Is Chargeback Prevention?
Chargeback prevention is a merchant strategy that aims to cut financial losses caused by refund disputes customers frequently initiate for various reasons. Chargebacks are refund operations that clients issue directly through the bank, skipping communication with a merchant. Such disputes are initiated for various reasons: the client doesn't trust the merchant company, the purchaser wants to receive a refund faster, the customer is unreliable and commits chargeback fraud, etc. Nevertheless, since the merchant is unaware of the dispute, a chargeback transaction often comes as a total surprise, negatively affecting the business' budget plan.
While many sellers might consider chargebacks a minor inconvenience, which businesses unavoidably face, even small-sum canceled transactions might have a serious negative impact on a merchant's revenue and reputation. Chargebacks cause multiple issues that become significant obstacles to the business's smooth development, including:
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Lost revenue.
After a chargeback is issued, if the bank approves such a financial operation, the transaction gets canceled, and the merchant loses money on the purchase. Moreover, if the customer initiates a chargeback dispute to refund a physical product, the seller loses money on shipping as well. While chargebacks for low-cost goods or services occasionally might not significantly impact the company, frequent refund operations for expensive items might seriously drain a merchant's budget. -
Additional transactional costs.
If a chargeback is issued, the merchant must pay additional fees for the chargeback operation. Also, payment processors tend to charge companies penalty fees to stimulate sellers to improve their customer service and minimize chargebacks. Moreover, frequent chargeback operations lower your reliability, which might push your payment processors to increase charges for every transaction within your company.
- Reduced partnership opportunities. Fewer companies want to collaborate with you since many chargeback disputes lower your trustworthiness. A lack of quality partnerships might significantly slow down your business's growth and result in additional monetary losses.
- Client flow decreases. Chargebacks significantly affect your reputation as a merchant. That's why frequent chargeback disputes might prevent new and regular customers from utilizing your services. A lack of clients might also significantly affect the merchant's financial stability, resulting in bankruptcy in the most severe cases.
The chargeback dispute protection strategy aims to minimize these issues and efficiently prevent legitimate chargebacks and chargeback fraud by implementing various tactics and tools. Learning about chargeback prevention solutions is a wise decision that will benefit merchant companies in the long run.
What Are Chargeback Alerts?
Avoiding refund disputes as an offline merchant seems like an easy task. However, things
get more complicated when it comes to online purchases. So the question is – how to
prevent chargebacks online and protect your company’s finances?
It is challenging to manage chargebacks yourself, especially in a large company with a
large client base. Fortunately, there’s an automated solution for this frustrating,
time-consuming issue. Chargeback alerts, offered by third-party providers, are an
excellent merchant chargeback prevention tool that significantly improves companies’
chargeback management, effectively reducing financial losses for the business.
How Do Chargeback Prevention Alerts Work?
The workflow of most chargeback prevention alerts is pretty similar. To ensure merchant protection from chargeback operations, the chargeback alert system sends sellers automated notifications about refund disputes before they are issued. Such notifications give the merchant 1 to 3 days to deal with the chargeback before the bank reverses the transaction, charging the company additional penalty fees. Chargeback protection services are a trustworthy solution for all businesses. Only companies that proved to be reliable partners to banks and processors have access to transactional information that allows one to track chargebacks. Moreover, these services usually offer several other practical tools besides warning alerts that can help prevent chargebacks even more effectively.
Why Businesses Need Chargeback Prevention Services
Chargeback prevention services have been trustworthy allies of ecommerce merchants for a while already. New and experienced, small and large, businesses of various kinds implement refund dispute prevention tools. But what is so incredible about the chargeback protection applications? Here is a list of reasons companies must seriously consider investing in such instruments.
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Better work organization.
Dealing with refund disputes might take a lot of work, especially for a merchant with a big client base. Chargeback services automatically prevent and resolve chargebacks, securing your revenue and saving you time. This allows your team to dedicate more attention to more urgent and complex tasks. -
Improved customer service.
Chargeback protection tools quickly resolve relatively simple friendly and criminal fraud and legitimate disputes while leaving you more time to deal with more complicated complaints. Clients whose demands were quickly and efficiently satisfied are more prone to become regular customers and leave positive reviews on your company’s services online, raising your rating as an ecommerce merchant. This will effectively stimulate the flow of new clients and open access to many beneficial business partnerships.
- Professional expertise. While chargeback prevention tools effectively resolve simple disputes automatically, there are some cases that you should attend to personally. Fortunately, chargeback protection services provide you with well-organized data on particular chargeback cases, offering you reports with information that can help you win a chargeback dispute.
- Data-based insights. Chargeback protection services collect information on past chargeback transactions. Chargeback prevention tools offer a professional analysis of previous refund disputes that can point out the weak spots in your chargeback defense system and tell you how to prevent chargebacks from recurring in the future.
The practical features of chargeback protection services make them a valuable tool for ecommerce merchants. Partnership with chargeback prevention companies is an extremely beneficial choice that efficiently minimizes the occurrence and recurrence of chargebacks, protecting the business’s financial security and boosting your company’s growth.
Develop the Right Strategy for Managing Chargebacks
While real-time alerts might effectively prevent chargebacks, there are also other long-time chargeback management solutions a merchant must consider implementing to ensure their company's revenue and reputation protection. Here, we present a list of strategies that can minimize chargebacks and help you win complex refund disputes, securing finances and the company's good name.
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Improve your site.
Quite often, an inconvenient site may cause many trouble for purchasers. Some bad design choices can "hide" vital details about the product, the item's costs, the delivery time, transaction options, etc. A good chargeback prevention tactic is to improve your site. Make sure your clients can comfortably explore their options. Provide simple and informative descriptions of your products. Add pictures. Choose pleasant, non-distracting colors and an easy-to-read font. Highlight important pieces of information. Create separate pages for comments and reviews with pictures to raise your customers' trust. Pay attention to design choices on the checkout page: add as many details about the order as possible and organize information properly so your client can be confident in their purchase. -
Communicate with your clients.
Another good chargeback prevention measure is communication with purchasers. Establish a reliable system of communication with your clients where customers can ask the company questions that are necessary for them. Offer additional assistance: add a button to contact the salesperson on your site. Let clients contact you via various means: leave your hotline number, e-mail address, factual address for letters, etc. Respond to your customer's messages quickly and offer practical advice. In case there is an accident that might affect your services or the product delivery, don't wait — notify your client about it and apologize. Be polite and friendly. Make purchasers feel appreciated. A welcoming attitude and quick problem resolution will ensure the prevention of chargebacks filed out of spite or due to misunderstandings.
- Explain your terms and policies. Many chargeback disputes can be initiated when customers are unaware of the company's rules or claim to be unaware of them. State your policies clearly. Create a separate page for your terms. Deliver information in simple terms and in an easy-to-understand way. Highlight important pieces of information. Add a hyperlink to your policies on the checkout page. You may also add a check-box button through which customers can confirm they know the merchant policies. This will ensure the prevention of fraudulent chargebacks and refund disputes initiated due to the customer's lack of knowledge of the seller's rules.
- Partner with reliable shipping companies. Another excellent prevention strategy is partnering with trustworthy delivery services. Often, an unreliable shipping company can damage items the client orders or deliver them later than expected. A chargeback operation can be issued if a client is unsatisfied with a product or service. Though it's not the merchant's fault, the bank will still charge the seller. To avoid such chargebacks, find a reliable delivery company that will take care of your goods and ship the parcels quickly.
- Promote purchase transparency. Fostering purchase transparency can help with legitimate chargeback prevention. Give your clients as much information about their purchase as you can. Give your customers a chance to track their orders. Send notifications about estimated item delivery and the issues that occur during shipment. Let customers rate your services honestly. This chargeback prevention strategy will foster trust between you and purchasers, building a strong client base of regular customers.
Chargeback prevention alerts are an excellent protection measure; however you shouldn't rely on chargeback prevention notifications only. Analyze your chargeback data regularly to find your weak spots, constantly improve your service and react to customer's complaint to prevent legitimate refund disputes, and support friendly communication with clients to minimize the risk of misunderstandings.
Identifying Chargeback Risk Factors
Chargebacks can be issued for various reasons. According to these reasons, requested chargebacks can be classified into three separate groups:
- Friendly fraud chargebacks
- Criminal fraud chargebacks
- Merchant error chargebacks
Each group has certain peculiarities that must be considered when developing a chargeback prevention strategy. Every case requires a specific approach and additional chargeback protection measures to ensure the security of the company’s budget and stable growth.
Friendly Fraud Chargebacks
Despite a misleading name, friendly fraud chargebacks are malicious refund disputes
initiated with the intent to benefit from reversed transactions through abuse of chargeback
bank mechanisms. Such fraud occurs when unreliable customers request chargebacks to get
goods or services for free. Usually, such clients use a believable, “friendly” excuse, such
as they were charged after canceling their subscription or the item they ordered was
damaged. At the same time, the product was shipped in good condition, or they never canceled
their subscription. There are also instances when friendly fraud chargebacks occur due to
customers’ inattentiveness; in cases like that, clients initiate invalid disputes that go
against the company’s policies they may not have read or checked briefly, skipping crucial
details. Proper documentation and proof of your competence as a seller might help you avoid
chargebacks caused by friendly fraud.
Criminal Fraud Chargebacks
In case of criminal fraud chargebacks, the unreliable clients make online purchases using
stolen credit card information. When the legitimate cardholders notice uncertain
transactions, they immediately contact the bank to issue a chargeback operation. And while
they are victims in this case and the disputes they initiate are legitimate, the merchants
still suffer from chargebacks and additional fees. It is essential to identify fraudsters
and blocklist them to prevent criminal chargebacks. If the company doesn’t implement
protection measures, there’s a high chance of such a situation recurring.
Merchant Error Chargebacks
While there are risks of friendly and criminal fraud in the ecommerce sphere, there are
still many cases when chargebacks occur due to the merchant’s mistakes. The shipment of the
wrong item, delivery to the wrong address, lost parcel, damaged product, double billing —
all these things still can happen even to experienced sellers. That’s why it is crucial to
double-check every delivery and support communication with your clients. Trust your
customers and respond to their complaints; listen to suggestions from your purchasers to
improve your service and prevent legitimate chargebacks.
Chargebacks can cause a lot of trouble. Fortunately, Germius can help you minimize
chargeback issues. Through Germius CRM today, you can gain access to efficient chargeback
prevention tools and ensure your business’s protection.
Why You Need to Choose Germius
Germius is a proven leader in payment orchestration with over eight years of industry experience. This company's client-centric approach ensures that every business receives personalized solutions that meet its unique requirements. The Germius team is committed to delivering high-quality services and building long-term partnerships, ensuring the protection of every company’s stable development. By partnering with Germius, you can obtain time-tested chargeback prevention instruments that will effectively reduce the occurrence of chargebacks.
Germius Partners: The Best Chargeback Prevention Companies
Germius is an official reseller of two chargeback protection services that proved their efficiency over time. Meet Verifi and Ethoca — two excellent tools that effectively help merchants prevent chargebacks, resolve refund disputes, and fight recurring friendly and criminal fraud.
Verifi
Verifi is a solid choice for ecommerce companies that prefer Visa operations. This fraud-prevention application offers businesses several practical features, including:
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CDRN Alerts
Verifi provides its clients with a Cardholder Dispute Resolution Network (CDRN) notification feature that allows merchants to prevent chargebacks even before the dispute is initiated. This function gives sellers additional time to refund customers before a bank approves the chargeback request. In cases like that, if a client is satisfied with this solution, the company escapes reversed transaction charges and chargeback penalty fees from the payment processor. -
Rapid Dispute Resolution (RDR)
Choosing Verifi gives you access to the Rapid Dispute Resolution (RDR) function. The RDR system automatically analyzes chargeback disputes, helping the merchant differentiate chargeback fraud cases from legitimate complaints from reliable customers. This function helps the seller avoid revenue losses and fraud-related chargeback fees while improving the team's time management. This allows workers to spend precious hours more efficiently and provide trustworthy purchasers with quality service. -
Order Insight
The Order Insight feature is an excellent tool that helps merchants maximize purchase transparency. This feature provides issuers and cardholders with detailed online purchase information, presented in an easy-to-read way, minimizing misunderstandings between the merchant and clients. This function effectively prevents friendly fraud chargeback disputes, saving time for the sellers and purchasers. -
Compelling Evidence 3.0.
Compelling Evidence 3.0. (C.E.3.0.) is a practical instrument that effectively improves ecommerce chargeback fraud management. Thanks to this feature, merchants can detect chargeback offenders even after prolonged periods. This activity-tracking system helps companies prevent chargebacks by identifying suspicious customers who might have previously made purchases on your site, offering all-covering protection from refund dispute fraud.
This chargeback-management solution is available within Germius CRM. Protect your business today with Verifi chargeback prevention service.
Ethoca
Ethoca chargeback management tools will be a great help to companies that choose Mastercard transactions. While the list of Ethoca functions is slightly shorter, this service still offers valuable features for your revenue protection. The list includes:
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Real-Time Alerts
Like Verifi's CDRN notifications, Ethoca's real-time alert system notifies ecommerce sellers about chargeback disputes before they are initiated. This feature allows merchants to prevent chargebacks and chargeback penalties effectively by resolving the issue directly with a customer without employing the bank chargeback services. -
Ethoca Consumer Clarity
The Ethoca Consumer Clarity function helps to prevent friendly fraud disputes by providing clients with simple and clear descriptions of purchases on cardholder statements. This feature also enhances online purchase transparency, fostering trust between the business and customers. -
Fraud Insights
The Ethoca Fraud Insights function offers merchants a professional expertise in chargeback data. This feature helps companies detect chargeback defense system imperfections, track chargeback fraud trends, and blocklist repeat offenders to effectively blocklist unreliable customers and prevent friendly and criminal fraud from recurring.
Ethoca chargeback management service is a simple but efficient solution for chargeback fraud and legitimate refund disputes. Invest in Ethoca today via Germius CRM to ensure your revenue and reputation protection.
The Bottom Line
Chargebacks are a serious issue that can threaten the success of any business. Whether it's a legitimate refund dispute or ecommerce chargeback fraud, the company still suffers from the consequences of reversed transactions. That's why chargeback prevention is crucial in ensuring your company's budget safety. Implementing services that prevent chargebacks is a wise decision that will benefit the business in many ways. Invest in chargeback prevention tools to secure your revenue and reputation while dedicating time to more important and complex tasks.
