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Editor's Note: Take a look at our featured best practice, Activity Based Costing (29-slide PowerPoint presentation). Activity Based Costing (ABC) analysis is a methodology for assigning costs to those activities that truly drive these costs. It is tangibly more accurate than traditional costing methods. Traditional costing methods overlook product-specific R&D, advertising, distribution/channel, and [read more]
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Chargebacks are one of the most common reasons for revenue loss related to fraud. The online business suffers from the increased number of frauds during the lockdown period. To understand the reasons for chargebacks or be able to use the VMPI system in advance, you have to find out the roots of the problem. Understanding the most popular issues that lead to chargebacks can help you cut these cases and improve your business outcome.
Business Owner’s ErrorNumerous types of mistakes can be totally made or fixed by merchants. They are usually the most common reasons for chargebacks. These errors can influence your reputation as a seller:
All the cases described in this section totally depend on the business owner. You can also prevent them. Check the delivery service you use, ask for customers’ reviews, and track the package. Online payment systems must be monitored and checked at least once a month to avoid errors that may occur with transactions.
This chargebacks’ reason is not related to the merchant’s errors, but you can still fix it. Frauds use credit card information to order goods without the consent of the true owner of the card. Criminals can steal cards offline, and cyber frauds can use the card information online. Hacked accounts are a common problem of modern society. This is why the chargebacks were created. They tend to protect cardholders from such situations. Users, who notice transactions they did not start, file for money return immediately.
You can fix the situation by increasing the security of transactions. Ask customers to prove their identity. There are numerous programs made specifically to search for frauds and block them.
You will not be the first merchant fooled by the customer. While you sold the high-quality product that was shipped without any problems, there is no guarantee that the buyer will not ask for money back. It is an incredibly popular reason for a chargeback.
Customers start the dispute because they mixed up the name of the product, changed their minds, or simply want to keep the product and receive the money back. Unfortunately, you have to deal with such cases as well, this is why it is extremely important to save the history of conversations, record them, and keep any possible proofs to win the dispute.
Hopefully, you’ve learned the most popular reasons why your customers file chargebacks. Knowing about them, you can prevent such an unpleasant situation. In order to protect your business, you have to use all these measures at once:
If you want to see your business prosper, change the situation with chargebacks. Make sure they occur either rarely or don’t occur at all. Improve your security and authorization systems. If you find the reason in the quality of delivery or the services you provide, improve it as quickly as possible before it ruins the business.
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