Sign in
article-hero-img

Protecting your business: important facts about chargebacks merchants need to know.

According to statistics by Midigator, a chargeback management software company, E-commerce businesses lose $3.94 for every $1 from a chargeback. As Covid-19 continues, the increase in chargeback claims is inevitable. 

In general, chargebacks can be deemed as a form of customer service protection. Customers have a chance to charge a reverse from a merchant through a card company or requests applied in the bank. 

And here it’s important to remember that that business altogether with responsibilities have the rights and all this information should be clarified in the merchant agreement for the prevention of disputable situations.

First of all, we need to differentiate the reasons for chargebacks:


First of all, we need to differentiate the reasons for chargebacks:

1. Customer disputes. 

Customers are unaware of delivery conditions that are inappropriate for them, or some other reasons, connected with service delivery. Customers are dissatisfied with the purchased product. Merchants should provide scrupulous and fair information on the products they sell. Chargebacks from product quality dissatisfaction create much more losses and burdens than profit from the sold item. 

2. Fraudulent activity

Chargebacks are often deemed as an identification of credit card fraud. Fraud, where the transaction was completed without the genuine cardholder’s participation or authorization. In most cases, the card information gets in the hands of scammers who then use it for unauthorized purchases. When the fraud is discovered, the chargeback process occurs. 

3. “Friendly Fraud” 

Despite the word “friendly”, this type of fraud has nothing friendly in its meaning. In most cases, the customers just apply for chargebacks and claim they haven’t authorized the transaction despite evidence pointing to the contrary. . In other words, “friendly fraud” can be considered as the deliberate abuse by loyal customers of the chargeback system. 

 


To prevent chargebacks a merchant should establish chargeback procedures that are equally fair to merchants, banks, and consumers.


  • Open communication is the key to the mitigation of chargebacks, occurring as a result of customer dissatisfaction. Provide detailed information on products, make the information accurate and detailed so customers wouldn’t have to return the item. A well-articulated and clear pre-purchase merchants policy allows you to identify your position and prevent all after arousing disputes. Merchants should explain returns, cancellation, and refund policies to customers, make them sure that, and that in most cases they don’t need to file a chargeback disputed can be resolved also by refunds
  • Merchants should keep an eye on suspicious purchases to reduce chargeback costs. For example, a big number of identical expensive items bought in an hour, or multiple purchases in a short time frame may indicate unauthorized card use.
  • To prevent card fraud most PSPs’ have integrated various security solutions and established security protocols for card acceptance to minimize the risk and keep up the necessary safety level of merchant’s payments processing. 3D Secure V2, 2-factor authentication, tokenization -  and real-time fraud prevention tools provide reliable processing of a transaction. Guavapay is one of those PSPs that pay extra attention to the reliability of its payment services and implements the aforementioned solutions to ensure a robust and impenetrable security infrastructure. Follow the link and learn more about the methods Guavapay protects its customer’s payment:
  •  https://guavapay.com/news/fraud-management-how-guavapay-protects-your-business-payments
  •  3D  Secure provides an extra protection layer by asking the customer to enter the password in addition to their credit card information. In combination with other payment security tools, the risk of chargebacks is mitigated. 

Here the following recommendations that will facilitate the prevention of chargebacks:

  • Choose the right payments partner - the payment provider must have diverse security solutions that comprehensively protect your payments. 
  • Verify contact information - If you have any concerns, check the contact information provided and contact the person by phone to verify the transaction. Collect as much information as possible to verify the legitimacy of each transaction
  • Never delay refunds so they result in chargebacks.
  • Carefully monitor chargeback requests
  • Monitor customer transactions to avoid fraud

Related content

article-item-img
Easy integration with Guavapay
The rise in digital payments enhances customer expectations from E-commerce checkouts and payment acceptance services. There are more ways for consumers to shop and buy than ever before, including, for example, in-person online payments or digital wallets. Businesses try to unify diverse services in one solution so the customer wouldn’t have the need to run for a competitive store with better payment offerings or leave the checkout process unfinished. As a result, businesses need all of these different payment methods to work seamlessly together to increase the conversation rate and provide customers with a frictionless payment experience. And it’s here when such a system as API comes on a help.
Read more
article-item-img
Guavapay and UnionPay Partnership
We are glad to announce that Guavapay has become the principal member of UnionPay International. The cooperation between Guavapay and UnionPay International is carried out in 3 directions. Guavapay is the principal member of UnionPay International
Read more
article-item-img
Business recovery in the post-pandemic world
COVID-19 impacted all businesses around the world and caused drastic changes in the way businesses are led. Pervasive restrictions and lockdowns have forced businesses to search for new ways to survive during this most unprecedented time in our lives. The necessity to adapt to new realities encourages businesses to search for ways to transform in order to cope with distressing situations and still be able to make ends meet. However, Fintechs seem to not only survive but thrive in these torrid conditions. Businesses have continued to grow and have been pivotal in towing national economies forward in the midst of this quicksand of a pandemic trying to drag them down.
Read more

Join the team

Your request
has been sent

Join the team

Your request
has been sent

Join the team

Your request
has been sent

Join the team

Your request
has been sent