What is a Chargeback?
Payment gateway charges are inevitable while making payments on online business platforms, especially on e-commerce websites. They are more like a chargeback minefield. Although the majority of sale transactions occur smoothly, at times, there are many problematic shopping situations that might result in a payment gateway charge. This may arise from frauds, impulsive purchases, certain deliberate scams, etc.
A chargeback is a kind of protection for the customers. If there is a case of a fraudulent transaction, the disputed money is refunded to the account of the cardholder. But for the merchants, it might prove to be a costly affair, as it might result in huge losses. The major credit card brands like MasterCard, Visa, American Express, and few others administer the chargeback process. The banks and the payment processors are required to abide by the prescribed rules made by these credit card companies.
Apparently, chargebacks can be similar to traditional refunds, but there is one major difference. Here the customers, instead of contacting the business platform for the refund, ask the bank to forcibly take the money from the merchant’s account. If the request is valid, the bank, after proper investigation, refunds the money to the customer. The customers are in no way obligated to return the product that was purchased and unfortunately, the merchants have no say in the matter.
Why do Chargebacks Happen?
There might be several reasons for a chargeback to happen. But generally, such payment gateway charges can be associated with unsatisfactory customer service or poor product delivery experience. Chargebacks can also be filed if the customer suspects any sort of fraudulent activity. Here are some of the possible reasons for payment gateway charges to happen:
- Frauds: This happens mostly when a purchase is made on a credit card without the proper authorization of the cardholder. This is generally the most common reason for chargebacks.
- Merchandise not received: There might be situations where due to some technical issues, the buyers don’t receive their order. This is when a bank will issue a chargeback.
- Duplicate Processing: It might happen that at times, the customer might get charged more than once for their purchase.
- Credit not processed: This problem arises when a buyer returns his product but doesn’t get a refund.
- Faulty product delivered: The customer claims a refund because of the delivery of a faulty/damaged product from the merchant.
Therefore chargebacks for merchants can have a negative impact on their businesses and can impact profitability and sales to a great extent. But there are also ways and tips to avoid chargebacks.
5 Tips to Avoid Chargebacks
- Improvement of payment process: The only way to have a smooth workflow and to eliminate human errors, is to improve the payment process. It is only by automation of credit card processing rules and dispute processes that this can be achieved.
- Clear Billing: This is an extremely essential tip to avoid a chargeback. The merchants should provide their contact information in a bold and clear way, for the customers to avoid making errors during payments.
- Ensuring Proper delivery: The merchants should take extra care to deliver the exact ordered items to their buyers within the scheduled time. They should also take proper measures to avoid any kind of damages to the product.
- Detecting Frauds: The merchants should take the necessary steps to detect fraud since they can easily identify the kind of transactions that might, later on, result in chargebacks.
- Use multi-layered payment protocols: The majority of payment problems stem from card-not-present (CNP) transactions. These problems can be solved by taking a multilayer approach by using- a) Address verification services (AVS) b) Email verification methods c) Shipping and billing address verifications d) Order validation tools like Shopify.
As payment gateway charges can generally prove to be a costly affair for the merchants, they should remain cautious and develop proper strategies to prevent these losses. They must be extremely proactive so as to avoid such chargeback cases and maintain absolute transparency between them and customers.