6 Ways to Protect Your Business from Chargeback Fraud

By Ashley Littles on
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emv_fraud_liability.jpgIf you’re a small business owner, you likely know a thing or two about chargebacks, and those things are probably not all that pleasant. Not only do these customer requests to reverse transaction charges present bookkeeping challenges, but reports show that about 86 percent of chargebacks are fraudulent.

While originally intended to protect consumers from dishonest merchants, it turns out that the ease of making chargebacks also requires merchants to take steps to protect themselves from dishonest consumers. Here are six steps you can take to prevent chargebacks:

Use EMV Technology

As of October 1, 2015, businesses that install EMV-capable card readers aren’t held liable for many fraudulent transactions. If you haven’t made the switch, now is the time, as you are responsible for many of the chargebacks that banks used to absorb, if you don’t.

Keep Receipts on File

Keep detailed records of all credit card transactions, so you have proof that a customer authorized a charge. It won’t always help prevent a chargeback, but without proof, your chances of contested a reversed transaction are slim.

Ship Securely

If you ship items, choose a carrier that will provide proof of delivery — or even those that require a customer’s signature — to avoid claims that items weren’t received when they were in actually were delivered.

Make Your Payment Descriptor Descriptive

When customers see an unfamiliar name on their bank account, they may start the chargeback process, thinking a charge is fraudulent. Make sure yours is a name they recognize rather than that of a parent company or other unfamiliar name to prevent needless confusion and hassle (for you and your customers). You can also ask your bank to include a telephone number for your business so that you can address issues directly to avoid the chargeback process and possible penalty fees.

Consider a Chargeback Warranty Program

While purchasing a chargeback warranty isn’t foolproof (they only cover fraudulent chargebacks), it can help you recover some chargeback fees through the use of fraud filters. Services vary but can include things like early warning dispute notifications and automated responses to chargebacks.

Kill chargebacks with kindness

Kindness in the form of stellar customer service can go a long way to prevent chargebacks as well. When customers have a pleasant experience with a business, they’re often less likely to try to renege on a purchase. Also, it’s important to note that all chargebacks aren’t fraudulent, and good customer service can help customers know what they’re getting up front, so there are no unpleasant surprises that result in chargebacks later.

Unfortunately, you’ll never be able to prevent all chargebacks, but with these strategies, you can at least cut down on the occurrence.