Tips To Prevent Chargeback Fraud In Your Business

You must have heard of chargeback fraud. It’s a friendly fraud where a customer purchases goods or services online using a credit card, and after receiving the purchase, requests a chargeback from the issuing bank. Some of the claims fraudsters make to file a credit card chargeback include;

  • The items weren’t delivered.
  • The items delivered weren’t as described.
  • The cardholder didn’t authorize the original transaction.
  • The incorrect amount was charged to the card.

Friendly fraud not only leads to the loss of your goods but also negatively affects your business through transaction processing costs, chargeback fees, and lost shipping. However, it’s necessary to consider chargeback fraud protection having your business operate without any fear of encountering such fraudsters to avoid such issues. You might need to consider merchant services chargeback for its efficiency by following the tips below.

Follow proper practices for CNP transactions

As you know, online purchases are card-not-present (CNP) transactions. The practice is different from in-person transactions since there are measures needed to confirm whether the customer is the cardholder owner. You have to use a secure eCommerce platform together with a reputable payment processor. Your payment processor must automatically have the ability to detect fraud and protect the seller. Some features like address verification services (AVS) can help by matching the customer’s billing address with the address on record with a credit card firm.

Also, you need to have as much documentation on hand as charge documentation that indicates AVS results, a copy of your return policy, receipts, and proof of delivery for any online sales made by the company. These documents can help you during the dispute process.

Payment processor with seller protection features

Your payment processor needs to provide fraud monitoring and detection services. These services include;

  • Provide information about when an order ought to be held for review.
  • Cover chargeback losses to a particular amount.
  • Making sure disputes are managed through your payment platform.
  • Allow you to check the charges that should automatically be approved.
  • Blacklist and whitelist account numbers.

Among the payment processors offering seller protection features are PayPal and Square.

Have an accurate payment descriptor

A payment descriptor is basically the way the business name ought to appear on a customer’s credit card statement. For example, signing up for your payment processor using your parent company’s name means that your descriptor will differ from your business’s name. Customers are likely not to recognize the charge, and this may result in a chargeback.

If you lack knowledge of your payment descriptor, make sure you consult your payment processor or merchant account service. This way, you will know everything about your payment descriptor.

Don’t fight back

Sometimes, you will be tempted to fight every chargeback. It’s likely to harm your business if you aren’t careful and especially when you lack evidence to support your business against the chargeback. When the chargeback involves a small amount of money, it’s wise to refund the customer. You need to understand that payment processors track the number of chargebacks filed against businesses. This can result in penalizing a business account, especially when it seems too high-risk. Such penalties come along with added fees, held funds, and unexpected higher processing rates.


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