Fight Back Before The Chargeback: What A Chargeback Guarantee Is And How You Can Prevent It

With more and more of retail shopping occurring online in recent years, the issue of significant losses due to credit card chargeback, a debit against a merchant’s account for a transaction the customer disputes, is a problem e-commerce retailers simply cannot ignore. Thankfully, there are some tips and tools which can better protect their revenue from being siphoned off.

Chargebacks Happen, And They’re Costly

There are a number of reasons a chargeback could occur. It could be triggered by what’s considered a merchant error – either failing to give a refund or failing to give one quickly enough — or mistakenly initiating a double charge. It can happen if the purchase was delivered to the wrong address, if it was stolen from the doorstep, and even if it did in fact arrive but the goods just weren’t good enough in the eyes of the recipient. Chargebacks, of course, can also occur due to fraudulent activity, which includes ‘plain’ fraud, which is an unauthorized order made using stolen credit card info, and ‘friendly fraud’ which is a a situation in which a customer purposely abuses the chargeback system.

Merchant error can be prevented in many of cases by moving away from any manual inputting of either the order or customer information, and going towards implementing an automated process.

Customer dissatisfaction can usually be resolved by product exchange or even prevented entirely by making sure that the refund policies and customer info are visible and accessible in several places (email receipt, paperwork inside the package, and on the pages up to and including checkout). This is key to resolving customer dissatisfaction issues before the chargeback process even begins.

And those fraudulent orders (and their revenue-depleting chargebacks) are plain out preventable, but only if the right type of solution is being used.

An example of the right type of solution would be Riskified, a company that handles both the fraud prevention and chargeback prevention fronts. Riskified utilizes an automated fraud detection system that is built on machine learning, which outperforms manual review both in terms of accuracy and speed. On top of that, they also offer a complete chargeback guarantee, and that’s huge for retailers. This means that if a Riskified-approved transaction later results in a chargeback, they will pay the order amount, fees from the payment processor, shipping costs – and the actual approval fee.

In the fight against fraud there’s also the issue of falsely placing a certain transaction in the fraud category, and Riskified handles this as well. This happens since companies tend to be overprotective, adding extra verification stages to the checkout process. When something seems too risky, the transaction is declined even if it shouldn’t have been. Obviously, turning away legitimate orders is a sure-fire way to limit revenue. There’s the cost of lost revenue on each declined transaction, but the bigger issue here perhaps is the insulted customers who are unlikely to give the company a second chance. All those unhappy shoppers head towards competitors, and ceding market share is never a positive situation.

An ounce of prevention is worth a pound of cure

Advanced fraud prevention solutions can deliver both low rates of fraudulent transactions and their corresponding chargeback costs, as well as very low rates of false declines. These systems utilize techniques such as device fingerprinting, machine learning and behavioral analysis to protect merchants from fraud while at the same time not limiting their growth. Chargebacks are costly and resource-consuming for merchants, yet with the right practices and tools, many of them can be avoided.