5 Reasons for Chargebacks and How to Prevent Them

Well, you thought the order was delivered and the money was yours. But suddenly swoosh! – and the bank sweeps it away from you, back to the payer. Congrats! You’ve been chargebacked. Or charged back, if you prefer it grammatically correct, but it doesn’t make it right for your business. It’s not always about credit card fraud: there are situations when the customer is completely right. So the chargeback preventive strategy is about doing your part of the deal right. And here are some methods.

Not What I Expected

They wanted their cups white and received the pink-and-gold set. They thought the smartphone would be smaller. They did not expect the inflated balloons to look like… hmmm… not like regular balloons, despite there had been warnings. All this justifies a chargeback.

To prevent it, you can just make your descriptions as detailed as possible. Not should they only be correct in each and every part, there should be simply no spots for misunderstanding.

Sorry, I Was Wrong, I Forgot

It’s a case when the customer makes a sheer mistake about not having made the purchase. How should you remind them? The method offered by most chargeback preventing services is similar. Just offer as many details as possible to remind the buyer when, where, and what they ordered. Make a detailed company descriptor for your customers to see in their transaction history. And send them notifications about the payments made. This might refresh their memory. As this case is the most obvious (assuming we deal with honest mistakes), it’s the easiest to handle.

Did I Subscribe to This?

If you offer digital services using a subscription model, you probably let potential users try it with some free trial period. After that, they can subscribe… or keep from that. And if they did not intend to subscribe though they did (or they say so, at least), chargeback might apply.

Which chargeback prevention measure to use to avoid that? First, you can send them reminders within that very app about the upcoming payment. It should contain just one button they need to tap to cancel the subscription. Second, you can require their card details only when they decide to actually subscribe, letting them enjoy the trial period without it.

I Want It Back!

What if the customer thought about charging you back the very moment when they made a purchase? Okay, then they can explain their actions with any of the previous reasons. The difference is, it would all be a lie. How can one tell it? First of all, by the explanation the fraudulent customer offers.

To prove them wrong (and yourself right), you need to prove that:

  • The card details had not been stolen by any third party.
  • The owner of the card and the customer who paid were the same person (or at least family members, the buyer authorized by the owner).
  • The purchase was made consciously, and the buyer understood what they were purchasing.
  • The purchase was delivered to the right destination in time (or at least shipped there by delivery services).
  • The item they purchased was the very one the customer ordered and paid for.

All of these facts can be proven if the details of the purchase were properly recorded and stored. For example, if a young man ordered a video game on a disc (like he previously did), and the delivery address coincides with the mailing address from his bank details, his chargeback claim probably should be declined. Maybe, he was drunk while ordering this particular game and then regretted it, but it’s his personal responsibility.

On the other hand, if the same order was made using a card that belonged to a 70-year-old woman living half the US away, who had never bought anything online, it’s a reason to decline this transaction even before it’s completed. And that’s when the next reason steps in.

It Wasn’t Me

This Shaggy defense sometimes describes what actually happens. Fraudsters use the customer’s financial information (the card number, the CVV code, and so on) to make purchases. When the owner finds out about it, the first reaction of his (and hers) is to file a chargeback. That’s right: it’s not them who bought this stuff.

How to prevent it? Device fingerprint-based heuristic systems can with high probability detect whether it’s the actual owner that made this payment. They use technical details of the device used for interaction, information like purchase time, location of the device, the delivery address, previous transactions with the same card and the same device, and so on.

What’s Mine Is Mine

So, follow these instructions, and though they won’t help you completely eliminate chargeback danger, with them, you will reduce the risk to acceptable levels. Implementing anti-chargeback measures might save your business from bigger losses.

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