Chargebacks are a topic with which we are all familiar. Unfortunately, a bulk of them in our industry can be attributed to “friendly fraud.”
Chargebacks can occur for many reasons, but the most common reasons such as “cardholder does not recognize” or “canceling recurring payment” are preventable. The cardholder may not recognize the descriptor on their billing statement; make sure to make the descriptor plainly obvious during the checkout process, like “Your purchase will appear as ‘XYZCorp.com 310-555-1212’ on your billing statement.”
Be sure to have support website and phone numbers staffed and provide quick responses. If the cardholder doesn’t bypass trying to reach out to the merchant themselves, they’ll go straight to their bank and tell them they don’t know what it is and they didn’t authorize the transaction.
Some of the measures that should already be in place, if you accept credit cards as a method of payment in this industry, are positive AVS and CVV responses during the authorization process; being in possession of these two pieces of information is already demonstrating an authorized use of the credit card. Additional information, which can be used in your favor, is sending a welcome email to your new customers with an activation link that must be clicked in order to verify the validity of the email address prior to accessing your paid content.
A no-questions-asked refund policy is another way to prevent chargebacks. You may feel more comfortable listing, “Refunds are considered on a case-by-case basis” to your terms and conditions but on the back-end, if you instruct your customer service team to issue refunds when they’re requested, it will go a long way to preventing chargebacks.
What about when a chargeback comes in? What do you do? Everyone is concerned about the acceptable chargeback count and ratio, but what if you’re well under those thresholds? How do you respond to a chargeback? At Mobius Payments, we work very closely with our merchants and we offer a variety of tools such as form letters to submit a response to the chargeback; we also offer an outline for a chargeback handling procedure and a variety of reports that help elucidate the primary reasons for chargebacks coming in under your merchant account. Once you know what the reasons for incoming chargebacks are, you can adjust your customer service methods accordingly to prevent future chargebacks from occurring.
The merchant typically has 14 days from when the chargeback is issued to respond before losing the opportunity to present the facts. Most of the time, the merchant already has all the supporting data needed to reverse a chargeback. Unfortunately, the chargeback fee will not be reversed, but the original amount of the sale can be returned to the merchant if sufficient evidence is provided within the allotted timeframe.
The supporting data that can be used to respond to a chargeback include the following: The cardholder’s first and last name, a positive AVS response, a positive CVV response, access logs, IP logging, e-mail address verification. If the merchant can provide the aforementioned data, it can be sufficiently proven that the transaction is legitimate. For example, if the AVS and IP address from where the transaction originated coincide and the CVV response was positive, there’s a pretty good chance the card number was used legitimately.
Every once in a while, a chargeback will come in under a “fraud” reason code, such as a credit card being reported as stolen and the transaction falls within the timeline from when the credit card was reported as stolen. In those instances, however, it will typically be plainly obvious when looking at the transaction data. The IP address of the transaction won’t match the Zip Code provided for AVS or the AVS and/or CVV will have a negative response code. In these instances, unfortunately, the chargeback is justified and will not be reversed.
Lastly, for our friends who ship tangible products, always ship using a tracking number, even if it’s via post, get the tracking number. A signature may be required for an order exceeding a certain value, but at least with proof of delivery to the billing address of the credit card, you have sufficient evidence to get the chargeback reversed in your favor.
If you’d like to learn more about how to respond to chargebacks and get them reversed, feel free to drop us a line. Mobius Payments is here to help you, the merchant, keep more of your money.
Jonathan Corona has more than a decade of experience in the electronic payments processing industry. As Mobius Payments Inc.’s vice president of compliance, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards set forth by the card associations. Mobius Payments specializes in high-risk merchant accounts in the U.S., E.U. and Asia.