Chargebacks are a nightmare for business owners. They occur when a customer asks their financial provider to reverse their card transaction with you. You lose the revenue as well as potentially incurring a fee.
Chargebacks are a very different scenario to refunds, where you, as the business owner, return the funds to the customer.
Why are chargebacks a problem?
Chargebacks are bad news for several reasons.
They indicate an issue with the product quality, marketing or customer service in your business. A customer will typically file a chargeback request if he or she is unhappy about an aspect of your customer experience.
Chargebacks reduce your revenue, and they can also negatively impact your reputation with payment providers; in the worst cases, business owners can be blacklisted and find it difficult to secure payment options for their business.
Card issuers often rule in favour of the consumer, even if the merchant has provided supporting evidence that goods and services were of good quality and the customer’s payment was processed correctly. The best way to win with chargeback claims is not to incur them in the first place.
So, what can we do to reduce the risk of chargebacks? Here are our seven top tips.
1. Under-promise and over-deliver
One of the leading causes of chargebacks is having disappointed customers who feel misled by advertising or sales processes.
Make sure that your advertising and your employees present an accurate picture of the service and the results that your customers can expect.
While it can be tempting to try and outdo your competition by making bolder claims, for your long-term success, it is better to promise your prospective customer less upfront and deliver more once they are a customer. In this scenario, they will be pleasantly surprised, and they may tell all of their friends!
2. Offer an outstanding customer experience
Happy customers will rarely make a chargeback claim. Make sure that your service is flawless and that you receive regular customer feedback that enables you to improve what you do.
If you have multiple physical locations, consider using mystery shopping services to give you independent insights into what you do well and where you can improve. Make sure that you run user testing on any online products before selling them, even if the tester is one of your employees who has been not part of the project, or a friend who is a good match for your ideal client.
3. Have robust deliveries and be clear on timeframes
There are few things more annoying to customers than ordering something that they are excited about which then doesn’t arrive when it is supposed to. Make sure that your website or your stores have clear information available on how deliveries are shipped and when they will come.
If there is some flexibility in the delivery date, set expectations for the worst-case scenario, this way, your customer will be pleasantly surprised as their goods arrive ahead of schedule. Only promise a specific delivery date if you can guarantee this with high accuracy.
4. Be accessible to customers
If customers know how to contact you, and they find it easy to access someone who can help them, then they are less likely to reach out to their card provider. Make sure that you or a nominated employee know how to support unhappy clients and turn them into ambassadors of your brand.
5. Have a clear refund and exchange policy
Make sure that your customers can easily find details of your policy on refunds or exchanges for their purchases. If you are happy to refund or exchange dissatisfied customers, then there is little need for them to file a chargeback claim. Yes, you will lose some or all of the revenue, but there will be less damage to your reputation.
6. Be vigilant for fraudulent transactions
Sadly, not all cases of chargebacks result from genuine customers. Sometimes they come from fraud. Be vigilant for any orders that seem strange, for example, abnormal order sizes, receiving orders from unusual locations or requests to ship orders to odd places.
Another sign to look out for is multiple failed payments, which can indicate that a fraudster is misusing a card. If you identify something that looks unusual contact your payment solution provider for guidance on your next steps.
7. Choose the right payment solution provider
Make sure that you partner with a payment solution provider who can help you to minimise your chargeback risk. For example, select a provider who offers high-quality card machines and card readers that will help you to stay compliant with card processing guidelines.
Ask about the provider’s fraud reduction processes, for example, payment experts UTP Group, partner with a well-respected bank that offers extensive fraud checking. Additionally, UTP Group, run extra daily fraud checks to protect their customers further, which is unique amongst payment solution providers.
Conclusion: it’s all in your hands!
There is a lot that business owners can proactively do to reduce their risk of chargebacks. It starts with painting an accurate picture of the results that consumers can expect, and then consistently over-delivering against that expectation.
Make yourself accessible to customers and have transparent and fair policies on what you’ll do if a customer is dissatisfied; remember that your reputation is an asset.
Be vigilant for fraudulent transactions and make sure that you have a payment solution provider who will support you to reduce your risks.