If you run any type of e-commerce business, you have probably already heard how important chargeback prevention is. However, what’s the danger behind chargebacks, why exactly do you have to prevent them, and, most importantly, how to do that?
In this article, we will talk about chargebacks and how to protect your business from them, as well as discuss some innovative chargeback prevention solutions. So, without any further ado, let us dive right into this topic.
What Is a Chargeback?
To understand how to prevent chargebacks, we need to get an idea of what a chargeback is first. So, basically, a chargeback is the procedure of refunding a customer after a dispute. It is important not to confuse chargeback with disputes since those two aren’t the same. As a matter of fact, a chargeback is the final step of the dispute procedure.
As a rule, disputes and eventual chargebacks are initiated by card issuers after a customer suspects fraud, which often happens due to misunderstandings between the seller and the customer or, in some cases, when a customer simply forgets they made a certain transaction.
Such cases are called illegitimate disputes or friendly fraud. At the same time, pretty often, cybercriminals intentionally submit disputes to scum online stores, and these instances are considered genuine fraud. In any case, businesses have to prevent all types of chargebacks since those cause a lot of problems and financial losses.
Why Do Businesses Need to Prevent Chargebacks?
We have briefly mentioned that chargebacks are no good for all types of e-commerce platforms, but what exactly do they do, and why do businesses need to prevent chargebacks? Well, below are some reasons to protect your e-commerce platform against chargebacks:
- Chargebacks cause significant revenue losses. Chargebacks are pretty expensive, and businesses often end up losing twice as much of the purchase price. That, obviously, leads to rather significant revenue losses, which is particularly painful for small businesses.
- Disputes and eventual chargebacks always come with costly fees and penalties. If a dispute is resolved in a chargeback, you will have to pay a dispute fee, which can vary from $20 to $100 per dispute, and that does not include the product cost, marketing expenses, operational fees, etc. You will have to pay a pretty significant amount of money just for a dispute. Additionally, you might get fined for having too many chargebacks, which can be a rather large sum of money, too.
- Chargebacks are one of the most common reasons for transaction approval rate reduction. Too many chargeback requests have a pretty serious impact on the work of your merchants and can cause multiple payment processing issues, including approval rate reduction. That leads to poor user experience, conversion rate reduction, loss of loyal customers, which altogether leads to revenue loss.
- Too many chargebacks can lead to the closure of your merchant accounts. Chargebacks are no good for your merchant accounts, and if you have too many, in the worst-case scenario, your merchants can be blocked by banks. Dealing with such a problem is pretty expensive and time-consuming, so it’s best to avoid it.
As you can see, there are many pretty significant reasons to start protecting your business from chargebacks. But how to do that? Let’s find out together in the following paragraph.
How to Prevent Chargebacks
It goes without saying that all businesses must take precautions to protect themselves against disputes that are resolved in chargebacks, but how do we do that? Here are some tips for you:
- Use chargeback prevention solutions — they help significantly reduce the number of chargebacks as well as help fight fraud.
- Update your customers about the order status and shipment so that they don’t open disputes before their order even arrives.
- Make sure you have a reliable customer support service to ensure that, in case of any issue, your customers reach out to you instead of opening a dispute.
- Provide clear return and refund policies for your customers to minimize misunderstandings.
- Try notifying your customers about upcoming subscription fee charges and allow them to easily cancel subscriptions if they need to.
- Implement 3D Secure or similar payment methods that require customers to confirm transactions instead of charging their cards immediately.
Most of these tips are pretty simple and affordable, so try to implement them, and you’ll soon be impressed by the results.
Germius and Chargeback Protection
Certainly, chargeback prevention systems are the best weapon in the war against disputes and fraud. Luckily, today, we have a lot of decent options on the market, including the solutions available within Germius. In particular, Germius offers two chargeback prevention alerts, Ethoca and Verifi, that will help you cover all your needs. So, let’s talk about each alert in a little more detail.
Ethoca
Ethoca is an up-to-date chargeback prevention alert that will efficiently lower the number of chargebacks and protect your merchants. This alert offers a lot of useful features, including fraud protection, chargeback costs reduction, fast dispute resolution, future fraud reduction, and many more. Ethoca is perfect for Mastercard payments, though it works with other systems, too. Lastly, Ethoca is super easy to get within Germius CRM.
Verifi
Verifi by Visa is another decent option that will help you safeguard your merchant accounts and save money by reducing the number of chargebacks. Just like Ethoca, Verifi comes with plenty of cool features, such as rapid dispute resolution, cardholder dispute resolution network, Order Insight, and Compelling Evidence 3.0. These services provide decent protection against both friendly and first-party fraud, therefore ensuring you won’t lose an extra penny. Finally, Verifi is available within Germius, so you can easily install it if you use this CRM.
Final Word
Chargebacks are no joke since they do have the power to cause significant revenue losses and damage to merchant accounts. Luckily, today, we have efficient means to significantly reduce the number of chargebacks and protect our businesses. CRMs, like Germius, offer all the tools that will help you win the battle against chargebacks and fraud, so why don’t you explore Germius and solve the problem of disputes for good?