The Facts on Chargeback Fraud
You’ve read about it. You’ve stressed about it. You’ve discussed it with your colleagues. You’ve worried about your issuers and how it impacts your relationship with them. It’s the elephant in the room. You don’t want to have to think and talk about it, but it can’t be avoided. Chargeback fraud. It’s a real thing. It hurts your bottom line. There is nothing friendly about it.
You need to talk about it, understand it, and know how you can be prepared to prevent it. Chargeback fraud doesn’t need to be part of your business plan. This ugly aspect of business doesn’t need to be your problem or headache.
We’re going to help you understand what this fraud really is and how you can protect your business from being damaged by the impacts of chargeback fraud. Don’t forget that for every chargeback you receive, your chargeback ratio is impacted and this translates into higher issuer fees.
Chargeback Fraud and What You Must Know
First, there is nothing friendly about chargeback fraud. Plain and simple, this is theft. It’s a willing deception perpetrated on the merchant and the credit card company to steal your products or services. This so called “friendly” fraud stems from the confusion that some of your customers may experience when they don’t understand a charge on their credit card statement, or it may be the result of an actual wrongly delivered a product. Let’s look at some of the ways a dishonest customer can and will commit chargeback fraud against your company:
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- Your customer says the product they ordered and paid for was never delivered, when in fact the product was delivered as you promised it would be. The challenge for you lies in proving that the customer did receive the product. The only way to do this is with very thorough shipping and receiving details. Make sure you have on file the customer’s requested shipping address and confirmation that the item was delivered to this address. (It helps if you can show the exact date and time of the delivery.) You can enforce a policy that requires a signature upon delivery. This prevents the customer from saying that the product must have been stolen or that they didn’t receive it. Make this requirement very clear during the purchase process; this prevents the customer from claiming that they didn’t know about the signature requirements or that they didn’t confirm the delivery address.
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- Your customer claims that what they bought and received does not match the product description on your website. To prevent this from occurring, you need to have a very detailed and thorough product description section. Use multiple images of the item so the customer can see it from all angles. Feature on your website a very detailed product description that includes information about the size, shape, materials, color, etc. Also, make sure your refund and returns policy is clearly displayed on each product page (or a link to the refund and returns policy). With this information clearly and easily available to your customer, you can remind them that it is possible to receive a refund when the item is returned as stated.
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- Your customer states that they did return the product but they haven’t received a refund. You need the paperwork and details to prove that the item was not returned, so therefore a refund was not processed; or that the item was returned and you have processed the refund; or that as clearly stated in your refund/return policy, the customer did not meet the clearly documented stipulations. In other words, you need to be organized and have the records and information to prove that the customer is stealing from you.
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- Your customer says they received the product from you, even though they cancelled the order. You need to provide proof of the order, proof of authorization, and verification on behalf of the customer that they accepted and confirmed the order details––and, if need be, proof that the order was never cancelled. You also need to have a clearly documented and easy-to-access cancellation policy. Direct the customer to the cancellation policy as well as your refunds and return policy.
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Preventing Chargeback Fraud
The truth is in the details. The more detailed information you can provide about your interaction with your customers, the more challenging it is for them to successfully steal from you and commit chargeback fraud. As we noted above, you need to have every moment of the transaction with your customer documented; you need clear product descriptions, a clear return/refund and cancellation policy; and it helps to have an easy way for your customers to contact you regarding problems with their order. Along with this, it really helps to have clear descriptors and details of the charge on the customer’s credit card statement. While this might appear to be a lot of work, just think about the costs associated with chargeback fraud. It’s better to do some extra work in the beginning to set up an end-to-end solution that will protect you and your business during the entire customer transaction, through to delivery of the product, and then, if required, to help you fight chargeback fraud. It’s better to be prepared than to take shortcuts and hope that you’re not the victim of theft.