In the world of commerce a chargeback is one of the most common, but also one of the most harmful, actions a customer can take against a merchant. These types of claims can be reversed by the merchant, but it can be quite difficult and the odds aren’t really in his favor. This is why some serious chargeback defense measures are the best thing any merchant can do in order to keep his reputation intact and his future clients satisfied.

What Is Chargeback?

A https://www.bams.com/chargeback-defense/ chargeback is when a client asks the card issuer to reverse a charge that appears on their credit card statement. Although different from a refund, some people might still get the two mixed up. The main difference is that, unlike a refund which is done directly by the merchant, a chargeback is done by the credit card issuer.

There are many reasons why a customer would want a chargeback. Some of them, like billing issues, can and should be easily prevented by making sure the business practices are the right ones and that complaints are addressed quickly ad professionally. According to the definition of the term from Wikipedia, there are also a series of other scenarios that are harder to prevent (https://en.wikipedia.org/wiki/Chargeback) such as:

• Failure to deliver the product or service to the client
• Inaccurate description of the service or product offered
• Loss or damage of the product during shipping
• Other technical errors

But although chargebacks are a great little tool for the customers in order to get their money back, it opens up a whole world of possible fake claims made by customers. These claims can seriously damage a merchant’s reputation and banks can even go so far as to deny some merchants services out of fear of this negative reputation. Because the banks operate on the “Customer is always right” principle, the fees for the chargebacks are automatically withdrawn from their accounts as soon as a claim is made by a customer. Until the merchant can demonstrate the claim is wrongful, he has to pay. Banks take note of how many claims a merchant has against him and can even decide to drop a merchant from their portfolio if he has too many.

In order for a business to defend against one of these claims, they have a limited time frame to do so. Within that time frame, he has to gather enough documentation in order to make a compelling case against the claimant. If he manages to get the necessary paperwork in time and submit it, then it gets reviewed by the card issuer and the case is settled. The card issuer decides who is liable for the sum in question and takes the necessary steps towards settling the situation.

What Are The Costs And Consequences Of Chargeback?

A chargeback claim is never good news for any business, regardless if you can prove it to be false. Yes, you can take certain steps in order to prevent this from happening, but there are serious consequences to even filing a claim.

Loss of revenue
The first and most noticeable loss is that of revenue. Firstly, the merchant loses any money the cardholder claims if the claim is not reversed. Also, additional shipping costs and other fees can be charged to the merchant by the customer. Even if the claim is reversed, a fee is deducted from the merchant’s account for every claim he has filed against him.

Negative image

The more claims a merchant has against him, the more of a bad reputation he gets. This is because banks tend to look out for merchants with too many claims against them and stamp them as high-risk to do business with. Some merchants can be subject to periodic reviews from their banks or card issuers and can also see their fees go up. Also, some merchants start being monitored and this monitoring comes at an extra fee. Merchants can even get blacklisted for up to 5 years if they do not bring their claims numbers down in a certain time period.

Is Claim Reversal A Form Of Chargeback Defense?

The simple answer to this question is yes, claim reversal is a form of https://www.bams.com/chargeback-defense/ chargeback defense but is the most difficult one there is. Although reversing a claim is possible, the policies of the banks and card issuers are usually designed in favor of the customer and not the merchant. Firstly, the documentation the merchant has to submit in order to reverse a claim has to be complete and it has to be submitted in a very short period of time after the claim has been filed. This can be quite difficult in some cases and most of the reversals exceed the designated time frame. Also, card issuers can provide additional documentation supporting their client’s claim or even consider the documentation submitted by the merchant to be incomplete. In any of these scenarios, the merchant is liable.

The biggest problem with a business trying to defend against any chargebacks is that both the claim and the reversal are submitted to the card issuer. But different card issuers have different codes for these situations, the main similarity between them being the fact that there are a whole lot of instances not covered by them. People can claim a chargeback for anything from buyer’s remorse to unrealistic expectations from the services of products offered. In 9 out of 10 cases the card issuer will side with the customer, regardless of what the reason invocated. The best defense a merchant can have in this case is to prove that the services or products provided are up to standards and have been shipped or performed as advertised.

What Other Methods Of Chargeback Defense Are There?

The first order of business when talking about defending against chargebacks should always be the quality of the services provided. A dissatisfied customer is a very bad thing to have. This is why any business should see to improving its customer experience. This can be done by continuously updating the protocol of how customers should be handled by the staff to ensure best practices across the board. Periodically evaluating your team can help and also implementing defense protocols is encouraged. One of the steps any protocol should include should be address verification on every order. Also, data collecting is encouraged in order to create a two-fold verification strategy.

Some of the best practices a business can implement when talking about chargeback defense:

• Product and service descriptions should be clear and constantly updated in order to best reflect them.
• Use easy to understand guidelines for refunds.
• Be approachable as a company by making sure customers can find your contact info.
• Make sure customers understand what your shipping conditions are.
• Provide high-quality customer support.

Another simple technique of defense is to constantly keep updated to the policies and guidelines that card issuers put in place for their clients. This can help any business – especially small businesses – know what they might come up against and prepare accordingly. Rather than trying to reverse a claim you can just try and prevent any of the situations that might trigger a claim in the first place.

But defending against chargebacks isn’t only a way for merchants to avoid claims and paying additional fees. It’s also a good way of evaluating your staff and what you offer. Try checking where most of the claims originate and take appropriate measures. You might find that customers just need a more friendly face or voice to talk to. Or you might better understand what your customers want from you and your products. It might just be a simple case of the wrong product description that can be solved without involving a bank or a card issuer.

The bottom line is that building a strong defense takes time and considerable effort, but it is worth taking the necessary steps towards a more solid merchant-customer relationship.