Merchant services chargeback is experienced when a client reports a cost that does not seem appropriate. For instance, in a scenario where the consumer is charged the wrong price for a product bought due to a possible technical error. After the realization of incorrect charges, clients begin the process of chargeback. Fraud-related chargebacks consume a lot of time and money for e-commerce stores. Here is the procedure for the chargeback process:
- The client files for a possible chargeback within 120 days after buying the product after realizing the transaction.
- The bank issuing the payment assesses the validity of the chargeback and begins the chargeback procedure with the merchant’s bank once validation of the client’s claim is determined.
- Research is done on the complaint and transaction at hand by the merchant’s bank. The retailer is asked for evidence to justify the purchase made before the end of 45 days.
- For valid claims, the amount transacted is refunded to the owner of the credit card used. In this case, the merchant incurs the cost associated with the claim. If the chargeback is not justified, the transactional amount is released to the account of the merchant.
Impacts of Chargeback
Fraud chargebacks affect retailers significantly. In most cases, credit card chargebacks cost merchants more than the amount in dispute. Below are several forms that chargeback fraud cases may impact retailers;
Incurring card processing fees
For every transaction, the processors of credit cards deduct a particular percentage. When a chargeback happens, retailers have the expense of the transaction processing fee.
Acquiring bank fees
Based on the merchant’s associated risk, the bank acquiring the money may charge an extra chargeback. If the merchant loses the fight against a chargeback dispute, the money is retained by the card owner, leaving the retailer paying fees due to the chargeback dispute.
Fines and risk of being blacklisted
Merchants should maintain the rate of chargeback below 1 %. Many chargeback disputes may result in the classification of a merchant as a high risk. With this, such retailers face fines and high fees on chargeback. To some extent, merchants can be blacklisted by the acquiring bank.
Every case of chargeback affects the effort, money, and time used in marketing the items. Bringing customers’ demands allocation of sufficient time to convince consumers to buy the items.
Costs of operation and investment
If the consumer retains the product, the merchant loses the cost of operations in regards to production and transportation of the item to the client. The retailer loses the product’s value: the cost of purchase, processing, storage, and delivery costs.
As an e-commerce store retailer, it is vital in making chargeback fraud protection efforts effective. Focus on improving customer support. Clients need to be listened to and have their problems solved. Ensuring that your clients can contact you via several different and reliable platforms. In the digital era, it facilitates a reliable customer support center to respond to emails, live chats, and phone calls.
By having easy access to your business contact details online, you encourage consumers to reach out to you in case of any issues before opting to file a chargeback.