Tis’ the Season for Chargebacks: Here’s How to Manage Post-Holiday Chargebacks for Cross-Border Purchases
Jan 4, 2022 3 minute Read
We all know the holidays can be stressful. From binge buying to late deliveries to replacement gifts, it can be a mess. Customers are mad, you’re mad, deliverers are mad. So what do you do? You’ll want to lower post-holiday chargebacks by understanding how this shopping period affects your business and how your processor handles transactions affected by incidents such as delivery issues. We’ve done our research and are here to present you with what we believe is a winning strategy for surviving the holidays and avoiding post-holiday chargebacks, especially for cross-border transactions.
Are cross-border transactions more expensive when it comes to chargebacks?
Chargebacks are chargebacks, plain and simple. But cross-border transactions are typically more expensive to process. So while you won’t get hit with additional fees simply because someone in a foreign market buys from your online store, you’ll still pay more if a chargeback happens. Or refunds, for that matter.
It also depends on your payment processor and the contract you have with them. We’ve mentioned this previously on our blog, but it doesn’t really make sense for you to pay fees for refunding a purchase. If you can, make sure your agreement excludes these types of fees.
As for chargebacks, you can’t really do much about the fees incurred. That’s why it’s imperative that you avoid chargebacks at all cost. Since the holiday season is met with crazed shopping and January is equally met with a spike in chargebacks, you need to do all you can to prep your business on the frontlines.
Why do chargebacks spike after the holidays?
There are a wide variety of reasons for why chargebacks spike after the holidays, but not are typically unique to this time of year. Simply put, more shopping equals more chargeback potential.
We’re using this phrase loosely here. This could cover anything from legitimately wrong items to “wrong” items being delivered. A customer can call their credit card company and complain that the product they ordered wasn’t delivered as expected. This also includes missing items, not just incorrect order fulfillment.
Shipping companies are not always so friendly to packages at this time of the year. With an uptick in deliveries and holiday spending, demand for next-day overseas shipments, and so forth, handling and care is often neglected. When customers receive those deliveries, though, they don’t often blame the shipping fulfillment company, they blame you.
There’s nothing worse than receiving a package days after you expected it to arrive. Unfortunately with the pandemic and worldwide shipping delays, this is bound to happen. Still, customers make cross-border purchases late in the season. No matter how an item’s delivery is delayed, it’s bound to be responded to with cancellations and chargeback requests.
Holiday Fraud and Scams
After the holidays, fraudsters typically attempt to cash in on gift cards they were given in exchange for “free” products they are selling on eBay and Craigslist. Scammers are out there all year round, but the holidays are always prime grounds for making their moves. This is also a heightened period for identity theft and phishing scams. They will use stolen credit card information and various other tactics to purchase gift cards, which they will then sell to unsuspecting buyers and reap huge profits.
This also includes friendly fraud like unrecognized transactions as well as buyer’s remorse, when a customer regrets their purchase. The latter often happens when they’ve surpassed your online store’s return policy.
Sometimes customers will purchase and return items for which they were issued a refund. However, if they do not receive the refund in a reasonable amount of time, they will want to dispute the transaction with their bank or issuing bank, claiming that they did not receive the money owed to them.
Poor Product Descriptions
Poor product descriptions can also lead to chargebacks and negative feedback from customers. If your product descriptions are vague or unclear, you could end up with unhappy customers who call the bank on you for fraud.
What can you do about chargeback and fraud prevention on cross-border transactions?
Here are our tips for preventing post-holiday chargebacks on all your seasonal transactions, including cross-border.
Ship with Tracking
Use tracking numbers and delivery confirmation when you ship packages so that you can prove that the item was sent to the customer. This will help you avoid being charged with an “unauthorized” chargeback because you don’t have any proof that the item was shipped in the first place.
Another way to avoid these disputes is by clearly stating your terms in your shipping policy. If customers know what they’re getting into before they buy from you, they’re less likely to dispute charges later on. Both of these shipping tactics are of increased importance when fulfilling international shipments resulting from cross-border transactions.
The easiest way to prevent post-holiday chargebacks is to ship the day a customer makes their purchase. By shipping on the same day, you’ll avoid any additional days that could be included in a late shipment chargeback. Customers have also become accustomed to having their products shipped within 24 hours of making the purchase. Loudly let them know your shipping policy and notify them each step of the way.
Stay in Touch
The most important thing a merchant can do is monitor and respond quickly to any holiday shopping cart abandonment or credit card disputes — anything that could lead to a chargeback. Escalating a dispute as fast as possible will get you a refund faster, and it’ll be less expensive for you, too.
Although this may all seem like common sense, merchants often wait to resolve an issue until after the holiday season has passed — not realizing how much money they’re leaving on the table in the process. By working with your team to develop a plan that prevents and resolves issues before they become chargebacks, you can cut down on your overall chargeback rate and save money.
Staying in touch also means you should take and use customer contact information like phone numbers and email addresses. This is a way to verify the identity of your customer (you can use the conversation history or phone records in a chargeback dispute) and to keep in touch with them about their order.
Extend Your Return Period
Extending the return period and updating your refund policy after the holidays (Christmas, Black Friday, Cyber Monday, etc.) can be a great way to prevent chargebacks and return fraud. A lot of people wait until a few days before the return period is up, and then file for a chargeback because they forgot about it or are too busy with other things.
The Authorization Verification System (AVS) is designed to prevent stolen credit card data from being used online — and it works, most of the time. Answering questions about the cardholder’s name and address should be second nature. After AVS comes 3-D Secure 2, or 3DS2. It requires a one-time password or a PIN when a customer logs into their bank account to authorize charges.
For cross-border transactions, you’ll want to focus your efforts on implementing region-specific security measures.
In order to prevent post-holiday chargebacks from occurring, make sure your business is PCI DDS-compliant. This will allow you to prevent common forms of credit card fraud and protect yourself from unwarranted chargeback fees. Plus, it’s particularly important for online retailers that accept credit card payments through their websites, as a data breach will compromise customer information and destroy credibility when doing online shopping. If your business is not PCI DDS-compliant, then be sure to use all secure payment methods over SSL encryption.
As part of PSD2 in Europe, merchants are required to follow Secure Customer Authentication protocols. SCA is a security protocol that requires financial institutions to verify the customer’s identity before processing any transactions. For an online merchant, this requires dual authentication for credit card payments, such as a password and a code sent to a customer’s mobile phone or email address. By forcing customers to confirm their identity through multiple channels, SCA protects against account takeover by cyber criminals and other fraudulent activities. Being compliant with SCA and the PSD2 will help you avoid cross-border chargebacks.
Don’t risk it with 3rd-party payment processors. A high-risk merchant account provider is your best bet to preventing post-holiday chargebacks this year.
If you’ll be selling products during the holiday season, it’s probably a good idea to take precautions against chargebacks. Trouble comes in when the buyer doesn’t have proof that they made a purchase from your shop and is attempting to get their money back. Chargebacks can be difficult to fight and will cost you money for the service, so you want to avoid them at all costs.
A high-risk merchant account is a specially designed credit card processor for ecommerce businesses that deal in high volumes of transactions and have high chargeback rates. If you’re worried about post-holiday chargebacks, a high-risk merchant account is your best option to combat them.
Talk to our industry experts here at DirectPayNet about opening your own high-risk merchant account today and start your new year with fraud protection, cross-border capabilities, and chargeback prevention.