So, you’ve received a chargeback. You may be new to chargebacks or an old hat at understanding the process. Either way, receiving a chargeback actually can be seen as good news! Essentially, it means that there is room for improvement in your business. It’s an opportunity for growth. Honestly, chargebacks are a great way to identify areas of business improvement. In turn, this translates into increased revenue, improved processes, and an opportunity to learn directly from your customers, to further their relationship with your business.
Rather than looking at the chargeback as negative, see it as positive and a launching pad for process improvements. Effective chargeback management is key to ensuring your business is running at its best. Your response to a chargeback can serve as an opportunity to stimulate an active review of your chargeback policy, customer service practices, sales and authorisation process, and your website content.
The First Steps in Managing a Chargeback
Chargebacks don’t need to be managed internally within your business. However, when they do happen, make sure you’re able to act on them quickly and use them to inform proactive business improvements. Too often, merchants receive a chargeback and either ignore it and absorb the cost, or they incorrectly weigh up their likelihood of winning the chargeback dispute, which only results in further lost resources and patience.
Don’t panic. Take a step back and assess the situation. As a business owner, the key is to have a plan in place that helps you review and respond to the situation quickly. The review component is essential in understanding how and why the chargeback has occurred. With this knowledge, an actionable chargeback management process can be implemented.
Consider the following in your initial reaction:
- Why was the chargeback filed? Review the reason code and accompanying chargeback notification details. Look at how and where the disputed charge was made. Using an intelligent chargeback management solution can aid in collecting this important data quickly.
- Is this a valid chargeback? Does the cardholder have a valid complaint, or is this an incident of friendly fraud? Use this information to guide the chargeback response, to either dispute or accept the claim.
- Customer service review. Look for holes in communication, ineffective information management, and areas for improvement in customer relations. Remember to review often overlooked details, such as billing descriptors, email confirmations, and your refund or returns policy.
- Get expert help. For your business, naturally you want to focus on day-to-day operations and delivering the best customer experience, not administrative burdens. Partnering with a team of chargeback experts to review your business practices, website, customer service, chargeback history, and customer database can provide the deep insight needed to pinpoint overlooked weaknesses in the sales and payment process that can lead to chargebacks.
Remember, don’t panic. Conduct the above review, analyse the information, ask more questions, and then move forward to make improvements and adjustments. This is also a good time to brush up on your chargeback, fraud, and prevention knowledge.
Establish a Chargeback Policy
A chargeback policy defines how a merchant manages their business and works to prevent and respond to chargebacks. With this policy in place, it’s possible for merchants to prevent the panic response to chargebacks and instead take a proactive response, further strengthening the business.
To formalise a chargeback policy, review the following questions and use your answers to create a custom policy. We advise against using another company’s chargeback policy—each business needs to tailor their own to meet their individual needs.
- What is your current chargeback response? Knowing the typical chargeback response practices (ignore, accept, dispute, panic) highlights costly decisions and room for savings
- What is your chargeback dispute success rate? Knowing the chargeback dispute success rate is important in identifying flaws in data management, website content, customer service, and the need for proven chargeback representment solutions
- What kinds of chargebacks are being filed? Knowing the chargeback types can identify if your business is a target for friendly fraud and theft
- Who is buying and subsequently filing chargebacks? Knowing who your customers are helps to establish a rules database and provides early warning signs for potential threats
- What are the chargeback costs? Knowing the time, money, and resources being spent on chargebacks supports the decision to what improvements to make, and possibly the need to bring in chargeback experts for a more thorough audit and ongoing support
Establishing a chargeback policy on your own can feel overwhelming. Many merchants don’t have easy access to the data required to answer these key questions, which is why it’s important to undertake this policy assessment. It’s also an opportunity to make changes that ensure chargeback risks are detected and future chargebacks can be prevented, making it easier to respond, rather than react to chargebacks.
Ready to improve your chargeback processes? Call us now: +61 3 9678 9059.