News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Two Steps That Can Cut Chargebacks by One-Third

Two Steps That Can Cut Chargebacks by One-Third

By Suresh Dakshina, Co-Founder, Chargeback Gurus

There are many factors merchants must consider when evaluating chargebacks, and a majority of them involve intentional fraud: stolen credit cards, well-conceived scams, or intentional attempts by consumers to get something for nothing. There’s no doubting that fraudsters are out there, but sometimes it’s you, not them. More than one-third of chargebacks are the result of something the merchant is not doing to protect itself. In our experience, by examining their internal operations and making improvements, merchants can greatly reduce the number of chargebacks that come as a result of back-office issues, rather than outright fraud.

Managing internal flaws is an area that merchants can easily control in two simple steps: Take preventive action and take corrective action. Do them both, and chargebacks will drop significantly.

Preventive Action

First, many chargebacks can be prevented by ensuring customers know what to expect. A poorly worded marketing message can lead customers to expect something other than what you can deliver. Step back for a moment and think like a customer instead of a merchant.

Multiple pages of arcane terms and conditions that nobody will read can lead to confusion, possibly misleading the customer and greatly increasing the chance for a chargeback. The longer your list of terms, the less chance anyone will read them. Explain in plain language what the product is, your billing terms, what happens if customers don’t receive the product, and how they can cancel an order or obtain a refund, as well as the billing descriptor (the way your company name will appear on the customer’s billing statement).

Make sure to provide an invoice for customers to print after they place an order. It should include your customer-service number, billing statement descriptor, product name and amount and billing terms. And, provide the customer an email copy of the invoice. When the order is shipped, include a hard copy of the invoice. These measures all make it easy for your customer to reach out to you if they have a problem, rather than calling the bank to dispute the charge.

Save customers from their own errors if you can. A customer might mistype an address or leave out an apartment number. This accounts for about five percent of delivery errors. Use software that can spot bad addresses (The U.S. Postal Service can tell you if an address really exists or not). If you can’t find the right address, you need protocols for who is going to call the customer and get the right information.

Have the package shipped ASAP. Amazon.com customers have gotten used to receiving orders sometimes in 12 hours. Shipping your product within 24 hours is no longer considered exceptional service—it’s expected. Delaying shipments increases the chances of unsatisfied customers. Be sure to let customers know the tracking number, so that they can see the package is on the way. And merchants should track their packages as well.

If a client calls your customer service department, be sure the support team is responsive. Answering complaint calls in less than 40 seconds is essential to prevent customers from becoming even more aggravated, which increases the risk of a chargeback. Also, phone reps should know every element of the product or service being offered. They also should have access to the tracking information on the packages that have been shipped. Try to predict questions that customers are going to ask, and make sure that your team can give the right answers.

While phone reps can learn a script that includes the most common questions and rote answers, train them to have real knowledge so they really can be responsive. If a customer says, “I have a baby crying here, can I get my refund?” the customer doesn’t want to hear your rep say, “I understand where you are coming from, and would you be interested in a discount on your next purchase?” The distraught parent is thinking, “If you understood where I am coming from, you’d give me my refund so I could take care of my child.”

Some call centers encourage their staff to save the sale, which results in agents pressuring customers. Forcing them to keep a product they no longer want will certainly increase the chances of a chargeback.

Also, pay attention to missed or abandoned calls. Call those customers back, apologize for not being able to respond immediately, and tell them the company’s dedication to service means they now have your full attention—and perhaps offer them a discount on future orders.

Corrective Action

If a merchant implements the preceding steps but is still facing a large number of chargebacks, the next step is corrective action.

Fully investigate internally the cause of all chargebacks. Bank notices of chargebacks will have a “reason code,” identifying the general category. If a customer spent 45 minutes on hold waiting for a response before getting frustrated and hanging up, they may have called the bank and said, “This is a big scam.” The reason code will categorize it as a fraudulent transaction, when in fact it’s really a customer service issue.

As part of a merchant’s investigation, they should read the entire chargeback letter, which is usually four or five pages and includes notes that detail the problem from the customer’s perspective. Recognizing problems that appear repetitively in a certain department can direct merchants about how to address a problem.

One merchant client took these suggestions to heart when its chargebacks had hit 4 percent of transactions. Within two months chargebacks had fallen to less than 1 percent, and their merchant account was no longer in jeopardy.

Knowing the root of the problem allows you to fix it. More often than not, the issue is not “out there.” Some problems are right there in your back office.

Suresh Dakshina Chargeback Gurus - Two Steps That Can Cut Chargebacks by One-Third Suresh Dakshina is co-founder of Chargeback Gurus, an Allen, Texas-based company that helps merchants manage, prevent, fight and win chargebacks.

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Daniel Leibovitch