More than anything else, its fraud that affects online business. If your online business suffers likewise, its time to make a few changes!
First, lets understand why do chargebacks happen? A chargeback occurs when a cardholder disputes a credit card purchase, for any one or more of the following reasons: -
• The item ordered by the customer was not delivered to him.
• The item delivered to him is damaged or in poor condition.
• The customer feels he hasn’t received what he thought he was buying, or, the customer feels he has been cheating into buying a product that was advertised differently.
• In case the purchase was made on a card lost or stolen from the card holder.
• Sometimes certain customers just use chargebacks to their advantage in order to get out of paying for a product.
So, if the customer is not happy and has initiated a chargeback, the card issuer bank will proceed with the chargeback process on behalf of the card-holder. Sometimes banks do not even inform the merchants about chargebacks, unless it is a clause of their agreement or contract. With the bank being under no obligation to notify the merchant of the chargeback, the bottom-line of the business can get seriously affected, pretty fast!
Chargebacks must be avoided! And to do that, the authenticity and credibility of the cardholder has to be verified. To do that effectively over an online platform, AVS is the best technological tool. AVS stands for Address Verification System; it does not have a 100% guarantee for fraud prevention but is definitely the best that is available today. AVS matches the billing address provided by the customer at the time of purchase with that provided at the time of applying for a credit card. Getting a match for an address and zip code is a good sign. However, if only one of the two matches, it is the merchants’ discretion whether the sale must be authorized or not. If there is no match, then it is in the best interest of the merchant to apologize to the customer and reject the order.
Here is how excessive chargebacks can cause irreparable damage. With every chargeback, not only does a merchant lose the actual inventory and the purchase price, but there are also chargeback fees assessed to the merchant each and every time. Consult your merchant account provider if you do not know what fees you can be hit with. That is not all. Merchants, who have excessive chargebacks, can lose their merchant account without warning. Moreover, they could end up on the MasterCard Match List, a.k.a. Terminated Merchant File, which is looked at by other providers and if you show up on it, this means you will not get a merchant account. You can expect to stay on the list for 5 years too.
Use caution and good judgment while accepting orders. Do not sell to any customer who is unable to complete the verification process. Lesser the chargebacks, better will be your Internet business and merchant account!
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