One of the risks of entering the convenient, cashless world of e-payment processing is dealing with chargebacks. Simply defined, chargebacks are any instances where a transaction has been disputed and reversed because of that dispute. While chargebacks are to be expected from time to time when you run a high-risk business, they can be costly and damaging to your financial reputation if they occur during critical minimum payment periods.
If you want to ensure your business is fully prepared to avoid and protect itself against as many chargebacks as possible, keep reading. We’ve gathered a list of the most effective measures and practices for avoiding costly chargebacks.
What Type of High-Risk Business Do You Have?
Knowing why your business is categorized as high-risk can help you determine the best course of action for avoiding costly chargebacks. The reasons customers might dispute charges will vary depending on whether you’re a high-volume business (e.g., car dealership) or a business with reputational risks (e.g., adult entertainment).
For high-volume businesses, you can be dealing with many purchases and expensive purchases as well. Therefore, customers are going to be a lot more cautious and attentive to anything that appears fraudulent or unauthorized on their credit card accounts.
In the case of reputational risks, these types of high-risk businesses are usually operated via e-commerce sites and can be subject to data theft if security measures aren’t sufficient. Ensure you have the most secure credit card processing. Be sure to ask your merchant account provider as well about its PCI compliance.
In addition to developing best practices for secure card processing, consider asking your provider about an all-inclusive plan. Such plans often include chargeback insurance up to $1,000 at no extra cost. While the amount of a customer’s purchase is what is withheld from your account during an investigation, the credit card company will often add extra fees into the amount that’s auto-debited as well.
You want to reduce the number of chargebacks you could experience per year. Unfortunately, even for businesses with diligent security compliance, it’s impossible to prevent all customers from issuing chargebacks. To put things in perspective, the Canadian Competition Bureau reported that between 2014 and 2016 the ballpark for money lost to fraudsters was over $290 million!
Make Top-Notch Customer Service Your Priority
The most impactful way to avoid costly chargebacks, next to keeping compliant with security measures, is to provide optimal customer service. You want your customers to feel that you have their best interests at heart and that your business is trustworthy. Put more care into your customers’ purchasing experience, whether online or in-person with card present.
For instance, if the authorization request for a transaction was declined, don’t complete the order anyway. Always keep your customers updated and let them know about the status of their transactions. Sometimes, you might need to call your authorization centre to determine why a request was declined.
Another related incident is running out of stock on an item a customer wants to purchase. Keep a constant communication flow to let customers know what’s going on and to alert them as to whether they can complete a transaction. If a customer has already placed an order for something unavailable, offer to cancel it promptly.
Although not specific to in-person transactions, there will be instances where you need to be certain a customer was only processed once for a single purchase. Make sure you only make a single imprint of the customer’s card and that transactions are entered only once into your point of sale terminal.
Implementing practices like these and those discussed above will improve your ability to avoid chargebacks.