June 15, 2022

    Why Chargeback Insurance Is Now a Must-Have for eCommerce Merchants

    AdobeStock_435159022The cost of chargebacks can add up fast. See why eCommerce merchants now need chargeback insurance to protect their small or medium size businesses.

    Too many chargebacks will hurt your business and your bottom line. However, there are solutions to help.  As an eCommerce merchant, you need chargeback insurance to eliminate this burden.

    Also known as chargeback reimbursement, chargeback guarantee, or chargeback warranty, this solution reimburses your business for the cost incurred from a chargeback resulting from a fraudulent transaction. If you still do not believe that chargebacks are harmful to your business, consider the following:

    According to Mercator Advisory Group, chargebacks accounted for 0.05% of transactions made via credit card prior to the pandemic. They do not include fraudulent purchases in these statistics. Today, however, in some categories (including travel), unfortunately, chargebacks are as high as 40%.

    If we have your attention, let’s go into more detail about why eCommerce merchants need chargeback insurance now more than ever.

    How Does Chargeback Insurance Work?

    The way chargeback insurance works depends on the policy and policies can vary based on the vendor.

    Before you choose a vendor, you need to closely review their policies. The policy may include restrictions and stipulations, so you need to clearly understand what those are to prevent claim denials.

    Upon choosing a vendor and subsequently accepting their terms for your chargeback insurance, your goal should be to yield a positive ROI for your coverage. This means that your reimbursement requests will have a high approval rate.

    An example would be if your policy only covers card-not-present (CNP) transactions, limiting you to chargeback reimbursements of only those types of transactions. It’s critical to read the fine print of your chargeback insurance policy so that you can receive the full benefits from it.

    Vendor Reimbursement

    In addition to chargeback reimbursement insurance, the vendor should also offer a fraud detection tool that helps you review every transaction that is processed and warning signs of potential fraud. If the tool cannot flag a fraudulent transaction accurately, and you encounter a chargeback, you may file a claim.

    While each policy is different, the insurer could reimburse you for the chargeback costs of the product or service that is sold and the profit loss.

    One thing that is the same among all policies is that to get a reimbursement, the chargeback must be deemed a designated type of fraud. Here are a few scenarios of what the insurance policy covers:

    • The vendor’s technology reviewed and approved the transaction.
    • You sent a reimbursement request in the allotted timeframe.
    • You have proof of delivery.
    • The goods purchased shipped prior to the chargeback notification date.

    Things that are not covered include:

    • A missed delivery or failed delivery.
    • Merchant errors.
    • Sales to high-risk places.
    • A certain type of product or service, like digital goods.
    • After the initial approval from the fraud prevention tool, you change the order.
    • A transaction has a flag that it may be fraud, and afterward manually approved.

    Sometimes vendors may specify a limit for coverage, so transactions up to a certain amount are covered. It is best to know what your insurance provider will and will not cover.

    eCommerce Merchant Payment Guarantee

    If you are an eCommerce merchant, you need chargeback insurance. We can help. At Vesta, we help accept more online orders while reducing the cost of fraud.

    We guarantee it with our Payment Guarantee solution. We help with card-not-present transactions, evaluating transactions for risk of fraud. If we make a mistake and you receive a chargeback later, we cover the costs. With our Payment Guarantee solution you have zero worries and zero fraud costs.

    It’s that simple. Contact Vesta today and learn more.


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