Unless you’re only accepting cash, you know that chargebacks are always going to be one of the risks of doing business and if chargebacks get out of control, it can do real damage to your company’s image. Since credit card issuers often have incentives to side with their customer over merchants when a chargeback is initiated, it’s important for business owners to be proactive in preventing the chargeback from occurring in the first place.

The risk of incurring chargebacks is highest for companies who do most of their business online, and until we develop and implement foolproof authentication protocols, lock down easily compromised web browsers, and teach everyone to use proper protection when shopping online, that will continue to be the case.

From the perspective of business owners, it’s a bit of a balancing act; you don’t want to make it too difficult for customers to place orders, and you don’t want to make it too easy for would-be criminals to place fraudulent orders.

First the basics of reviewing an order:

Does the customer’s IP address and billing address roughly match up?

An order placed from an IP address that doesn’t match the billing address isn’t uncommon, but when there is a mismatch, it might be worth it to dig a little deeper.

Are there unusual (customer name, street name, city name) misspellings?

Typos aren’t uncommon, but with Spell Check and auto-fill for commonly typed form information, it’s unlikely a customer would fail to type their own name or hometown correctly.

Track the chargeback codes provided by the issuing bank. It’s entirely possible that chargebacks aren’t a result of fraud but dissatisfied customers.

If you’re seeing code 30 or code 53 frequently, you may need to look at your shipping times and tracking.

If you’re drop shipping, you’ll want to review the quality of the products being delivered – it’s possible the supplier is cutting corners or not delivering the correct items.

You may want to review your customer service procedures and refund policy; A customer-friendly refund policy and fast, helpful customer support could mean the difference between incurring a costly chargeback and gaining a loyal customer.

If all else fails, put the order on hold, reach out to the customer and if verification is impossible, void the order, and be sure to explain to the potentially real customer that you’re very sorry for the inconvenience, but due to fraud concerns, you’ve had to suspend their order and will be glad to complete their transaction upon further review. Remember: It’s for their protection. Sure, you might lose a couple of customers along the way, but the majority of customers will appreciate your proactive approach and feel more confident purchasing from you in the future.

Unfortunately, there’s no “one weird trick” when it comes to preventing chargebacks, but by being proactive and responsive, you can greatly reduce the likelihood that you’ll get burned.


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