How Merchants Can Protect Against Chargebacks

Creating a chargeback protection strategy can be a confusing, stressful, time-consuming process. Where do you even begin?

If you’re feeling overwhelmed by the process, don’t worry. Kount can help. We’ve broken down the process into seven manageable steps.

Here’s what you need to get started.

1. Be Realistic.

If you want to completely eliminate the risk of chargebacks, you don’t have to read this entire article. You can stop right here. Because if you want absolute, fail-safe, 100% chargeback protection, there is only one thing to do: stop accepting credit and debit card payments.

That’s it. The end.

So before you go any farther, be realistic and check your expectations.

If a service provider is promising chargeback protection, understand that tools can help you minimize risk, but not eliminate it. It is impossible to prevent each and every chargeback.

2. Analyze your data.

This tip is included in every conversation we have about chargeback prevention: analyze your data. Why? Because it is that important. It’s probably the most impactful thing you can do.

Breaking down your dispute data by different variables and analyzing it helps you understand why chargebacks are happening so you can solve problems at their source. This insight is crucial if you want long-term chargeback protection.

With data, you make educated decisions.

Without data, you make hunches and guesses. You have no way of knowing what is actually happening, what will be an effective solution, or whether or not you’ve fixed the problem.

3. Resolve disputes before they become chargebacks.

If our most commonly offered tip is to analyze your data, our second most popular tip is this: use tools that allow you to resolve customer disputes before they become chargebacks.

Tools like prevention alerts and VMPI open alternate lines of communication between you and the cardholder’s bank. The bank comes to you directly to resolve the dispute instead of using the chargeback process.

This tactic provides multi-layer protection:

• Protection Against Threshold Breaches: Resolving disputes with these tools doesn’t damage your chargeback-to-transaction ratio so your risk of breaching thresholds is reduced and your merchant accounts are healthier.
• Protection Against Lost Merchandise: You often have the chance to stop shipment on disputed orders, retaining fulfillment, shipping, and product costs.
• Protection Against Future Chargebacks: Communicating directly with the cardholder’s bank can happen in near real time, as opposed to the months-long chargeback process. Be alerted to issues earlier, resolve problems faster, and reduce the risk of future chargebacks.

4. Review Your Policies

The best protection against friendly fraud often comes down to one thing: making it easier for the cardholder to request a refund from you than a chargeback from the bank.

Take some time to audit your terms and policies. Ask yourself these questions.

• Are your policies easy to find? Do you have direct links from the homepage and the checkout page? Do you share information in the order confirmation email?
• Can the average consumer understand what you are saying? Is your wording simple and direct?
• Are you flexible? Are you willing to make an exception to the rules if it will ensure customers are satisfied with their purchases?
• Are your deadlines reasonable? Do you give customers plenty of time to cancel services or return merchandise?

If you answered “no” to any of these questions, you’re at a greater risk for chargebacks. The more user-friendly your policies are, the better your chargeback protection will be.

5. Make sure your entire team is committed to creating an exemplary customer experience.

Many chargebacks come from customers who are unhappy with their experiences or don’t find sufficient value in what you are offering. It’s impossible to please everyone, but that doesn’t mean you shouldn’t try.

Don’t just aim to provide a satisfactory customer experience. Focus on perfecting every single impression the customer has of your business from start to finish. Optimize all of it.

To do that, you’ll need to carefully audit the procedures and practices of each department.

• Marketing: Are product descriptions detailed and accurate? Are your ads and marketing campaigns honest and realistic? Is someone responding to social media interactions?
• IT: Is the Contact Us form working properly? Are you successfully capturing AVS and CVV data?
• Fulfillment: Is merchandise sent with the correct packaging so items don’t break in transit? Are published timelines accurate?
• Customer Service: Are customer queries being answered quickly? Are solutions accurate and complete?

Turn your chargeback protection efforts into a company-wide initiative. Make sure everyone understands what’s at stake, and encourage team members to look for ways to reduce risk.

6. Protect your revenue too.

You probably interpret “chargeback protection” as efforts to protect your business from experiencing chargebacks. However, you should also consider it as protecting your bottom line against chargebacks.

Defend your hard-earned revenue. Fight back to recover what’s been lost to friendly fraud and illegitimate chargebacks.

7. Don’t go overboard.

There is nothing good about a chargeback but a whole lot that is bad. It’s completely natural to want to minimize all those terrible things as much as possible.

But don’t go overboard.

Your chargeback protection efforts need to balance risk with reward. With the wrong strategies and focus, you’ll reduce revenue as you reduce risk. You’ll stop chargebacks, but you’ll also stop good sales.

Look at the big picture. Focus on a comprehensive plan with multiple layers of protection rather than using one or two tools with rigid and restrictive rules.

Want Even Easier Chargeback Protection?

If protecting your business still sounds like a challenging task — one you don’t want to manage on your own — Kount can help.

Schedule a time to meet with one of our chargeback experts and customize a chargeback protection strategy that’s just right for your business.