When consumers notice an error on their credit card bill or if they haven’t received merchandise that they purchased online, they have the ability to contest it with a chargeback. This matter can be addressed either with the merchant or with the credit card issuing bank. Furthermore, UK consumers are protected from personal loss caused by fraud and will be refunded by their financial institution, as long as they have taken due care with their confidential data.
There is no guarantee of being entitled to a chargeback in every instance. That being said, the most common examples of disputed transactions include:
- Goods or services delivered are not as described
- Unrecognised transactions
- Non-supply or non-receipt within the agreed time frame
- Duplicated or fraudulent transactions
- Charges made without your permission
- Insolvency – the merchant stopped operation and you did not get what you paid for
Transaction disputes that lead to chargebacks are common with consumers. In recent years, issuing banks, or issuers, have come to enable consumers to initiate transaction disputes via their phone banking apps with one click, allowing them to easily dispute a charge that looks suspicious to them. One example is when the merchant’s business name does not match the payee name that appears on the consumer’s online banking statement. This scenario also makes it difficult for consumers to properly identify whom they should contact before disputing the charge with their issuer.
In fact, according to a recent study by Javelin Strategy & Research, 63% of consumers who request chargebacks are also more cautious about frequenting merchants similar to the one where the issue occurred. This is particularly risky for a merchant when a problem arises from something central to the business’s model, such as a failure to cancel a recurring payment from a subscription-based service.
Merchants must be particularly wary of chargebacks when selling services or products online, in what is known as a card-not-present transaction. When chargebacks get out of control, merchants experience significant losses and even risk losing processing privileges from issuers.
How can merchants reduce their chargeback risks?
First, it is important to understand that there are numerous reasons why consumers request chargebacks:
- The consumer attempts to contact a merchant with questions about a purchase, receives no reply and becomes frustrated.
- The purchased item arrives damaged or was not as it was described.
- The consumer wants to return the item, but feels like the return policy was too complicated or too time-consuming.
The consumer calls the bank to inquire about a charge, and the bank issues them a chargeback without directly informing the cardholder.
A merchant’s first step to prevent chargebacks is creating transparency with services, products and fees. To keep chargebacks in check, merchants must take steps to ensure their customers know what they are being charged for and what to expect. Business websites should clearly state shipping information, any product guarantees or warranties, and their refund and returns policy.
Chargebacks can cause resource drain and revenue loss. To ensure that your business is protected from the adverse effects of chargebacks, contact one of our consultants today for insights and solutions on how to prevent chargebacks.