Anyone who has been in the business world for any period of time knows what chargebacks are.  They are those nasty vermin that steal profits and threaten the future of our companies.

Unfortunately, nothing about chargebacks is easy.  The entire process, from start to finish, demands a lot of time and attention.  There aren’t any quick fixes for these financial nightmares.  However, if you create a thorough chargeback management system that attends to both prevention and representment, you stand the best chance of guarding and recouping your hard-earned profits.

Chargeback Prevention

Before you can take the necessary steps to prevent chargebacks, you must first know what causes them.  The two biggest chargeback instigators are fraud and faulty customer service.  Adequate prevention means you must address both issues.

Prevent and Detect Fraud

There are several tools you can use that will help weed out fraudulent activity for card-not-present purchases.  Sometimes, the customer views these extra steps as cumbersome; but in the long run, you both will benefit.

• Card Verification Value – Known as CVV2, the three numbers printed on the signature panel of a card can help reduce the risk of fraud.  At the very least, requesting shoppers to enter the CVV2 ensures they are actually holding the card in their hand.
• Address Verification Service – AVS is a behind the scenes step; the shopper won’t have to take any extra action.  By verifying the billing address listed in the order against the cardholder’s registered address, you can cut down on fraud.
• Verified by Visa – Both major credit card companies offer an extra layer of protection with real time authorization.  After online shoppers clicks “buy,” they are routed to a new screen – the Verified by Visa screen.  Customers will have to enter a prearranged password to verify their identity.
• MasterCard SecureCode – Like Verified by Visa, this extra step helps ensure the cardholder is the one making the purchase.  If the shopper doesn’t enter the SecureCode or fails to enter it correctly, the purchase won’t be finalized.

No matter how many tools you take advantage of, there is still a chance that determined fraudsters can slip past your walls of protection.  Hopefully, you’ll have enough hands-on involvement to catch these transactions. 

Keep an eye out for the most common indicators of fraud.  If you suspect the transaction could have been made without the cardholder’s authorization, do not proceed.  Follow up with the customer to ensure the purchase is legitimate.  If you notice one or more of these characteristics, proceed with caution:

• New customers
• Larger-than-normal orders or big-ticket items
• Several variations of the same item
• Rush or overnight shipping – especially if the order is already expensive
• Several transactions placed on cards with similar account numbers (a batch of numbers might have been stolen in bulk)
• Multiple transactions placed on multiple cards and shipped to the same address
• Multiple transactions placed on the same card and shipped to different addresses
• Multiple transactions placed from the same IP address

Improve Customer Service

Sadly, in today’s internet-driven world, some of the most basic principles of business success get overlooked.  Customer service should always be a priority – no matter what products or services you provide. 

Consider the following ways improve customer service to reduce the risk of chargebacks:

• Describe your products in a thorough – yet concise – way.  Answer any possible questions your shoppers might have – but don’t use jargon they won’t understand.  Include specifics about the technicalities (size, weight, dimensions, etc.) and construction materials (cotton, polyester, oak, recycled plastic, etc.).
• Include photos – the more the better!  When possible, include a zoom feature so shoppers can focus in on specific areas.  Capture the product from all different angles.
• Have a clear and concise policy page.  Link to the page in the shopping cart and order confirmation email.
• Include several different shipping options and be clear about the anticipated delivery date.  For example, “Orders usually processed in two business days and delivered in three business days, courtesy of UPS Ground.”
• Include all your contact information on your website.  Make it easier for the disgruntled merchant to call you than file a chargeback.
• Answer the phone within three rings.  The longer the customer has to wait, the angrier they will be when you answer.
• Send automated emails in response to your contact page.  Let customers know you have received their message and will reply within two business days.
• Don’t charge the card until the order has been shipped.
• Cancel reoccurring transactions as soon as the cardholder makes the request.

Unfortunately, you can’t prevent all chargebacks.  There will always be a professional criminal or an impossible-to-please customer who is determined to make your life difficult.  When such instances occur, be prepared for chargeback representment.

Chargeback Representment

The chargeback representment process is the opportunity for the merchant to dispute a chargeback.  It is your chance to provide the issuing bank with evidence to prove the chargeback is not warranted.

In reality, the representment process starts before the transaction is even made.  Attention to detail, acquiring the necessary information, and keeping accurate records are vital to representment success.

Unfortunately, the burden of proof in the representment process lies with the merchant.  You must be able to prove – with written documentation – the chargeback is faulty. 

Here are some things that can help ensure you recoup your profits:

• Delivery confirmation – Some “friendly fraudsters” will file a chargeback based on the claim they never received the item.  By using signature confirmation on all orders (or orders over a certain dollar amount), you have written proof the item did in fact reach its final destination.
• Internal product key – Unfortunately, chargeback fraud is rampant in the digital product world.  Some merchants will install an internal product key.  This can be accessed to prove the digital item was delivered and received.  It can also be used to terminate services is the user files a chargeback.
• Openly share your policies regarding returns, refunds, service cancellations or exchanges.  For card-not-present transactions, it is best to have an additional step in the checkout process that requires customers to sign or initial after reading the policies.  For card-present transactions, make sure the customer reads and understands the policies before signing (they should be pre-printed on the receipt).

Depending on the size of your organization, chargebacks might become a daily burden.  Since there is such a limited timeframe to file a chargeback representment, staying on top of the process is sometimes nearly impossible.

In these situations, it is often best to outsource the task to professionals.  For example, Chargebacks911 manages chargebacks and engages is representment on your behalf. 

Chargebacks are an unfortunate part of the business world.  However, if you take the necessary steps to prevent chargebacks and doggedly fight those refunds that occur, you stand an excellent chance of maintaining your hard-earned profits.

Featured images:

•  License: Royalty Free or iStock source: http://www.flickr.com/photos/59937401@N07/5856795621/in/photolist-9VxBhR-9VxAFa-gfA2Vs-gfzPsa-aJULi8-aH9mTe-8skdeK-gDyQEd-9DmP3X-cijCuy-cijCrQ-92e5sN-7G3rCc-hKzF8w-9WvTjv-83tRRh-8XfEGc-apgBYM-9WvRFz-jfbUYb-eSamtY-8PbJHs-dGvuZP-dGvv2t-cs9foU-84s8zT-bFmTAR-bX5qpz-8GvC72-cUcCum-7VTj6K-a6QJMm-7Rpm3D-bjzSyT-efvXcu-aoQdv6-9vhaAV-aLeX36-8skcwZ-9iGbHV-9iKjiL-8Da1uw-h1VPuw-gtRVUY-gtSm76-bQzbXX-eWHV5Z-7VG8oX-edqzSG-bC3fSR-9zYVzM

is a business consultant who works with Chargebacks911.  After working for several years as a merchant himself, Ted offers tips and suggestions based on his own experience.  Feel free to look him up on or .

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