Chargebacks both damage the relationship with your customer and to your revenue. What’s worse is that they could threaten your business’s ability to process payments entirely.

The pandemic led to a large amount of card fraud. It’s even estimated that up to 60% of chargeback fraud is friendly fraud! To learn even more. 

We will discuss a few chargeback prevention strategies you can take before your chargebacks get out of control and cost your business big losses.

Chargeback Prevention of Merchant Errors

A “merchant error” chargeback is a term that refers to any chargeback that is due to a cardholder that got what they purchased per the agreement with the merchant. Also, it refers to an erroneous charge from a merchant like a duplicate, unauthorized, or incorrect transaction.

Merchant errors can arise from challenges like:

• Processing errors
• Unresponsive customer service
• Shipping problems
• Misleading marketing
• Unclear policies

It may be impossible to pinpoint it just to one issue, but collectively, merchant errors such as these add up.

The good news is that these errors are entirely preventable. It begins with inspecting your current practices and policies to identify loopholes. Then, rewrite your policies and fill in the gaps to close the loopholes that can cause you to lose revenue.

How Do Cardholders Use Chargebacks?

Abuse of the chargeback system is a growing challenge. When you first approve a transaction, you receive the revenue from the cardholder’s bank after authorization (well, after clearing and settlement happens). But that revenue might never be realized if the cardholder files a chargeback after receiving their order.

Even worse, your bank and the card networks will catch note rising chargebacks and will begin imposing restrictions and fees, which can absolutely cripple your business and your business’s reputation.

Chargebacks all come with fees, which can be as high as $25 per chargeback. Vesta has been measuring and preventing fraudulent transactions for more than 25 years.

Preventing Chargeback Fraud

There are a few different types of chargeback fraud. Criminal credit card fraud happens when a stolen credit card or card number makes an unauthorized transaction. This type of fraud is expanding worldwide.

Friendly fraud happens when a legitimate cardholder makes a purchase but files a chargeback with their bank to recover their funds after they receive the service or product. It’s another malicious type of chargeback fraud that can be very difficult to prevent before it happens. 

The best method of preventing chargebacks from friendly fraud is by becoming familiar with the customer transaction history with your business, network inquiries and chargeback alerts.

Chargeback Solutions

Chargeback prevention starts with a few important strategies. First, use fraud prevention tools that are available to you.

Next, improve customer service. You want to communicate well with your customers to avoid complications in fulfilling orders. Keep your customers posted on every situation.

You’ll want to eliminate merchant errors and provide clear service descriptions. Be specific to eliminate any future misunderstandings.

Also, make sure that your team manages your recurring payments closely. Customers with recurring charges demand exemplary service, and you want to give them what they expect. Not fulfilling expectations can lead to chargebacks.

Ask a Professional for Help

Many times, you are better off getting expert help, and that’s where we come in. Vesta solutions use advanced machine learning technology and data science to help customers like you with chargeback prevention enabling you to grow your business.