Chargeback Risk Factors and How to Prevent Them

Chargebacks have become a real problem for online merchants. While all sellers want to fight chargebacks, not everyone understands what causes chargebacks. The fact is that there are many factors that increase the risk of a chargeback. So understanding the causes can reduce the number of chargebacks and improve your company’s payment rating.

Reducing chargeback rates will also save you time and money. So in this article, we’ve compiled the key risk factors and reasons why customers file chargebacks. We’ll also look at how you can reduce the risk of filing chargebacks for each reason.

Why Do Customers File Chargebacks?

Before we move on to risk factors, let’s discuss the main reasons for chargebacks. There are a total of three main reasons why customers most often file chargebacks:

• Criminal Fraud – A complaint that came as a result of the actions of a fraudster.
• Friendly Fraud – A complaint that is caused by accidental or intentional abuse of a chargeback.
• Seller Error – A complaint arose due to errors in the seller’s actions or inaccuracies in the product description.

Unfortunately, no universal solution will prevent all types of chargebacks. However, chargeback protection helps merchants develop a strategy to protect their business from unauthorized charges and excessive reimbursements. It’s a fee-based service that uses various capabilities, including direct connections to credit card networks and issuing banks, to help merchants through the entire dispute resolution process.

Most Common Chargeback Risk Factors and How to Eliminate Them

As stated earlier, there are many chargeback risk factors that online merchants face every day. Below we’ll look at the key facts that are more common than others and discuss how you can reduce the risks.

Confusing Policies

Perhaps the most common risk factor is when customers don’t follow your game rules because they can’t find or understand them. A classic example is when a customer is unhappy with a purchase for some reason, and instead of going to the seller for a replacement or refund, they go to the bank and file a chargeback. Although this all sounds simple, it is a big problem for sellers.

Reduce Your Risk

To avoid chargebacks, for this reason, it is the seller’s responsibility to make sure that shipping methods, as well as order return policies, are detailed and in a place that is accessible to every buyer. This will reduce the risk of submitting chargebacks due to misguided policies.

Unclear Contact Information

Not being able to contact the seller at any time can be frustrating for the buyer. After all, your online store is open 24/7, so you have to serve customers around the clock. And if they have placed an order but have questions or other difficulties, it is important that the buyer has the opportunity to contact your customer support promptly. Otherwise, there is a high risk that they will file a chargeback.

Reduce Your Risk

It’s no secret that contact information should be visible on almost every site page. You should also give the buyer as many options for contacting them as possible: phone number, email address, live chat, links to social media profiles, etc. If you don’t have the option to have customer service available 24/7, be sure to specify business hours and stick to them. Using chatbots is another great way to give buyers the ability to contact sellers at their convenience.

Slow Customer Response

Studies have shown that about 50 percent of customers expect a response from online store support within an hour. In today’s dynamic world, retailers can’t afford to take long to respond to customer inquiries. If you don’t respond within 5 to 15 minutes, the customer will likely contact the bank and ask for a chargeback.

Reduce Your Risk

To reduce the risk of a chargeback, respond to all customer inquiries as quickly as possible. In order to ensure that every customer request is not left unanswered, you need to create a quality infrastructure. If you can’t create comprehensive customer service at your company, consider working with outsourcing companies.

Not Tracking Deliveries

Having a tracking number for each order allows buyers to keep track of their purchases. Without this information, the buyer won’t know when their order is being fulfilled and when the package will arrive. If the delivery takes longer than the site says and the customer can’t track it, that’s a reason to request a chargeback.

Reduce Your Risk

Always provide your customers with a parcel tracking number. This gives you many advantages. First, the customer can find out for himself where their parcel is. Secondly, if the customer filed a chargeback claim, you will have powerful proof that the package was sent and reached the addressee. 

The Bottom Line

As the eCommerce market grows, the number of chargebacks is steadily increasing. All the chargeback risk factors listed above can cause you to lose money, but the biggest mistake online merchants make is doing nothing. Using chargeback protection avoids most of the causes of chargebacks and saves your business from inappropriate monetary expenditures.