Top 7 causes of Chargeback

Chargeback in credit card transactions causes e-Commerce businesses to suffer huge losses in profits. Chargebacks often come from both subjective and objective causes. However, regardless of the type of chargeback, they cause damage to businesses in terms of product loss, reduced revenue, loss of chargeback fees, and reputational damage. Therefore, for e-commerce businesses, understanding the causes of chargebacks is necessary to handle, take preventive measures, protest chargebacks and prevent loss of revenue.

This post is from PlutusPay will focus on the top causes of chargeback. This knowledge will help E-Commerce business brothers get basic measures to protect their interests.

Occurrence of chargeback and incompetence of chargeback codes:

Chargeback occurs when a cardholder requests a refund of an amount deducted by a business. Usually, to do this, the customer must provide a reason for the card network. Then, the card issuer will classify the cause according to the chargeback reason codes (Chargeback reason codes) of the card network and notify the connecting bank of the business. The connecting bank or payment service provider then provides the information to the business for processing.

As an e-com business, you might think that these chargeback codes can explain the cause for each chargeback. However, these codes are often not enough to find the root cause and prevent future cases of chargeback. This is because these codes are generated only to reflect the true cause behind the chargeback in some cases. For example, in the case of Friendly Fraud, the chargeback could be classified by a code that is unlikely to be the actual cause. Therefore, you need to dig deeper to better understand the cause of chargeback.

The top causes of chargeback:

Cyber Fraud (Online Fraud):

Cybercriminals using stolen credit card information to make online purchases are one of the most common. In such situations, if the original cardholder notices a Fraudulent charge on their credit card statement, they will usually submit a chargeback request and request a refund. Online fraud can take many forms, from triangle fraud to identity theft scams being the most common. These chargebacks are true but can be prevented by using a high quality online anti-fraud solution and prevented right before the transaction

Affiliate Fraud (Affiliate Marketing Fraud)

Chargeback related to affiliate fraud occurs when the affiliate marketer (Affiliate marketer) fake increases the efficiency of their work to receive a larger amount of commission.

Affiliate marketers are performance-based professionals who work with businesses to promote their products/services. They are paid a previously agreed upon commission for the sales they generate. Sometimes, dishonest Affiliate marketers make fraudulent purchases using credit card information stolen in Affiliate Fraud. By doing so, they receive a commission from the supplier. However, this results in a flurry of chargebacks when the original cardholder realizes these charges and requests a chargeback from the merchant.

Friendly Fraud (Friendly Fraud):

There are many cases where a cardholder's valid transactions are disputed with the reason of wanting a refund, for reasons that are often invalid or false. Such chargebacks are known as “friendly fraud” and can be intentional or unintentional. Friendly cheats are very common and cover many different scenarios, including:

• A customer tries to scam a seller by buying a product or service, using it, and then arguing to try not to pay for the item.
• The buyer feels remorse, or the situation where the buyer tries to get his money back by dispute. They do so out of fear that their refund request will not be accepted under the refund policy.
• Cardholders do not recognize their valid transaction, possibly because the transaction was made by a member of the customer's cardholder family or because they forgot they had ever made this transaction. This is also sometimes referred to as family fraud (Family Fraud).

Late delivery:

When the actual delivery time of a product is longer than expected or according to the information provided by the business, customers are often suspicious and ask for a chargeback because the goods have not been received.

Unsatisfactory product or service:

If a customer is not satisfied with the product or service received and cannot receive a refund, they usually contact the card network to request a direct chargeback. For example, they often do so in the event of damaged goods, missing goods, or wrongly ordered goods, but the return policy cannot be applied. This also happens if they contact customer service and don't get the quick resolution they expect

Wrong amount of payment

Sometimes, customers are deducted the wrong amount due to input errors from the business's staff. This could, for example, be caused by entering the wrong number or making a mistake when repeatedly charging from the card. In such cases, cardholders open dispute for wrong amount when they receive statement slip and request chargeback.

Recurring Transactions (Recurring Transactions):

With the rapid growth of subscription services, subscription-related chargebacks are increasing day by day due to various reasons.

Data from a survey by Mastercard shows that as many as 60% chargebacks on their network are related to subscriptions.

Chargebacks related to subscriptions occur in a variety of situations. Specifically, include:

• Customers sign up for multiple subscription services and then forget about it. When they notice a deduction, they open a dispute to avoid payment and get a refund.
• Sometimes, subscription service providers tend to make the cancellation process complicated and difficult. In those cases, disputes and refund requests have become an easy way for customers to get out of it
• There are also situations where a provider's subscription system is not updated immediately after unsubscribing, and subscribers are charged in the next billing cycle even after canceling the subscription.

summary

While the above are the most common causes of chargebacks, sellers must know that, while they may not be able to completely eliminate chargebacks, they can still protect their interests by taking the appropriate measures. fit. Either way, resolving chargebacks is time-consuming and costly and reduces your profits, so you need to take precautions at all costs.