Even if a merchant does everything in his or her power to avoid chargebacks before they take their first sale, they are still at risk. The best preventative regimen still leaves room for issues and problems that can result in chargebacks. There are additional steps a merchant must take in order to protect him- or herself.
Tell Customers Who will do the Billing
Internet transactions often involve a third-party credit card payment processor. This handy innovation has made online business more accessible for many entrepreneurs. However, it can also cause confusion on the part of consumers resulting in chargebacks.
Let’s say our hypothetical widget-seller, John Acme, uses a third-party processor for his credit card orders. The company with whom he does business is known as Green Gadget, Inc. Acme’s customers may be confused when they see their bill. Knowing they don’t do business with anyone named Green Gadget, they seek a chargeback.
This situation is also true when one web site or internet venture works under a larger umbrella owned by the same entity. For instance, John Acme may sell widgets at his “Hot Widgets Site.” Meanwhile, he may be selling gadgets at his “Cool Gadgets Site.” John uses one merchant account for both aspects of his enterprise, which is named “Acme Goodies.” When customers see Acme Goodies on their bill, they may or may not associate their purchase with the “Hot Widgets” or “Cool Gadgets.” The consumer confusion can result in chargebacks.
Unfortunately, a unique billing name for every web site is not always possible. If it is possible for a merchant, they should pursue that strategy. Others should simply make sure to take the time to advise their customers of the name that will appear on their credit card statement.
Some indication of the billing name should probably be made on the sales page. If a merchant sends a follow-up email to buyers the information should be included there, as well. This relatively simple act may allow an otherwise confused buyer to recognize the transaction on their statement and can reduce chargebacks accordingly.
Provide a Good Receipt
A clear and informative receipt can reduce chargebacks. Consumers who are provided with the details of their purchase in black and white are far less likely to attempt a chargeback later. The receipt functions in many ways to discourage chargebacks.
First, it communicates necessary details to the consumer, reducing the likelihood of confusion on their part. This can prevent some chargebacks from ever happening.
Second, a good receipt will include the contact information necessary to keep the lines of communication between vendor and customer open. Merchant accessibility results in complaints being directed to the merchant instead of being immediately referred to the credit card issuer, further minimizing the risk of chargebacks.
Third, a professional receipt communicates to customers that a merchant is serious and organized in their efforts. By maintaining a professional image, a merchant can deter those scam artists who may be seeking soft targets.
Finally, a quality receipt also helps a merchant in his or her own record-keeping efforts. Maintaining receipts makes recalling needed data a breeze if a chargeback should occur.
A receipt can be provided on-screen following a purchase along with information regarding how it can be saved for the customer’s records. Although many internet businesses stop at that point, it is also advisable to email a complete receipt to the customer, as well. By making the details of the transaction clear and insuring that the receipt is delivered a merchant can reduce the likelihood of chargebacks.
Collect CVV2 Codes
The back of every credit card includes a long series of numbers. The last three digits in this sequence are often referred to as a CVV2 code. American Express cards feature a four digit code on the front of the card that serves the same function. This code does not appear in print anywhere but on the card itself. Thus, anyone who is able to recite a correct CVV2 code either physically possesses or did physically possess the credit card at one point.
Obviously, requiring the use of a CVV2 code will reduce the instances of credit card fraud, which is a chief cause of subsequent chargebacks. Many scammers and thieves are able to find credit card numbers to use for their online pursuits. Relatively few of these villains, however, are capable of also obtaining the matching CVV2 codes.
Obtaining and verifying a CVV2 code will not guarantee that all transactions are completely legitimate. However, it will dramatically reduce the number of fraudulent sales one might otherwise receive.
The ability to require a proper CVV2 code should be a feature of the merchant’s credit card processing account. If a merchant account provider or third-party billing partner does not allow you to require CVV2 matches for credit card orders, one should look for other billing solutions that offer better protection from fraud.
Collect Customer Telephone Numbers
Collecting the telephone numbers of those who purchase your products can be of tremendous value in reducing the number of chargebacks one may otherwise encounter.
As noted earlier, any means by which communication between customer and merchant can be effectuated is desirable. This increases the chances to negotiate an alternative to a chargeback or to solve issues of confusion that may otherwise result in chargebacks.
Additionally, a customer telephone number is a great resource when investigating purchases a merchant has flagged as potentially problematic. It allows a seller a potential means of contacting a suspect customer. Many times, a simple phone call will allow one to discern the legitimacy of a transaction. In other cases, an incorrect phone number or a false number can serve as additional evidence that a suspicious purchase may be fraudulent and can give the merchant cause to pause before processing the order.
Requiring a customer phone number also decreases, to some extent, the likelihood that a slightly disgruntled customer will request a chargeback. The buyer will be well aware that a merchant can contact them directly. In some cases, less than sincere customers use chargebacks as a tool of convenience. The prospect of actually having to discuss their fictional concerns may be enough to prevent them from calling their credit card company in the first place.
Use an AVS System
An AVS (address verification system or service) can reduce instances of fraud considerably. Some industry experts claim that massive reductions in fraud levels can be obtained simply by gathering and checking address information associated with a credit card number.
Generally, an AVS will require the seller to provide information obtained from the customer regarding the buyer’s address. The AVS service will check that information against what is on file for the credit card itself. If a different address or ZIP code is discovered the transaction is not processed.
This means that any would-be scammer would have to know not only the credit card number and expiration date, but also the billing address for the credit card. While not foolproof, this extra hurdle is easy for legitimate buyers to clear and difficult for the criminal to manage. When used in conjunction with CVV2 codes, AVS can further reduce instances of fraud, which invariably lead to chargebacks.
Merchants should strive to use a card processing service that allows for AVS on all credit card transactions. The resultant decrease in chargebacks makes use of the service a bargain for any online merchant.
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