The holiday season is gearing up for record sales for my online store. How can I avoid chargebacks?

Q: Black Friday and Cyber Monday have set record sales for my consumer products ecommerce store.  This is great news for my business but I’m wondering how I can avoid chargebacks in Q1.  I’m focusing a lot on the upcoming Christmas season and have increased ad spend by 30%. I’m hoping to close out the year with a 25% increase in sales over last year.  

Every year since I started operating, I see a noticeable increase in my chargeback rate in Q1. It worries me as I have one merchant account for my business and as my sales drop in the first quarter of the year, my chargeback rate doubles.

Do you have any tips that will help me avoid this for 2021?

A: I’m so glad to hear you are having a record year. Congratulations on your success.  There are several effective strategies to manage chargebacks while protecting your bottom line. 

The chargeback prevention basics

There are a couple of things you should be doing already to ensure you limit friendly fraud and avoid chargebacks.  Here’s a quick summary:

1 – Verify your descriptor to ensure it is correct and allows customers to easily identify you on their credit card statement.

2 – Make your contact information easy to find on your website. Include your company name, address, phone number and email. If possible add chat, social media and text support.  The more ways your customers can reach out to you the better.

3 – Basic verifications such as AVS and CVV checks should be done as soon as your customer enters their credit card information on your checkout page.

4 – Your return policy, refund policy and shipping terms should be clear. If there are delays in shipping, regularly communicate with your customers.

5 – Send an email confirmation once an order is placed.  Have a manual process to verify if any emails bounce back.

Avoiding chargebacks is not possible

Even if you follow all the rules and make your checkout process as clear as possible, there will always be chargebacks. Your goal should be to minimize them to avoid losing profit from costs like chargeback fees and fines from your payment processor if you breach the number of chargebacks allowed.

Cardholders have the right to claim a chargeback.  Ecommerce business makes it more difficult for merchants to avoid, given there is no PIN entered and no receipt signed.

Fraudsters love high volume holiday seasons as many of the checks you would normally make are sometimes forgotten as the busy season starts. There are additional measures you can put in place to avoid fraudulent transactions and friendly fraud claims.

1 – Address verification: verify that both the shipping and billing address exist. Some merchants only check the billing address to ensure the credit card is valid.

2 – Visa offers the Visa Merchant Purchase Inquiry (VMPI).  This will alert you of a possible chargeback dispute or high-risk transaction. Ask your payment processor for details on how to sign up. Here are some details on the program 

3 – 3D Secure. I repeat this one often because it works and with the new version of 3DS2, it makes the process frictionless so your customers don’t get sent out of your shopping cart. Paay offers this technology with a quick and fast setup process.

4 – During the Christmas season, you may want to add more shipping options to ensure you have proof of delivery. This can be used to show your customer’s issuing bank that the transaction did indeed occur. If the reason code for the chargeback comes as merchandise not received, you will definitely win your case.

5 – Fraud monitoring software. Several companies specialize in fraud scoring to identify potential red flags in your transactions.  Your payment gateway may have a tool such as Kount already integrated. 

Final thoughts on card fraud

If you’re experiencing a sales boom during this holiday season, it’s important to safeguard your bottom line by implementing fraud prevention measures now to avoid losses from refunds, chargebacks and chargeback fees.

Card issuers, Visa, Mastercard, and all credit card companies have a vested interest in avoiding chargebacks as these are very costly and time consuming.  Your payment processor understands your challenges and offers several tools via your payment gateway and 3rd party services to fight friendly fraud, identify stolen credit cards and avoid chargeback disputes.

If the chargeback reason code is mainly fraud, that can get you in more hot water or even MATCH listed. This can cripple your business and prevent you from getting another merchant account. Visa and Mastercard have limits on chargebacks with the fraud reason code that are allowed from one merchant.

If you’re working with Stripe or PayPal, it’s important to get a back up merchant account, as these providers are less tolerant to chargeback spikes.

Speak with the experts at DirectPayNet to ensure you have all the tools in place to have a record sales year without the headaches that come with chargebacks in Q1. Our solution integrates quickly with most shopping carts like Shopify so you can be up and running quickly without costly integrations. Contact us today!