From the outside it may seem that online payments are easy. You just need to attach your webpage to a paying agent of your choice and swoosh, ready to go. The money just starts flowing.
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You may like it or not, but you will have chargebacks in your web business. I’m sure about that.
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Nowadays, with constantly increasing number of online transactions and better consumer awareness (which is great!), it is important things are under control.
The cardholders are entitled to invoke a chargeback procedure. This may be carried out in the event their merchant does not perform a contract for the items they have paid for or when their card has been used for a non-authorized payment. While this option is extremely convenient and safe for the cardholders, it is less fun for the merchants to deal with such a request.
Agreed, it is the issuer bank’s duty to take this up, on the other hand, it will be the merchant who will be charged for each procedure. Unless they have strong arguments that the chargeback shouldn’t have been initiated in the first place.
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Chargeback is the new black. I hear about them on daily basis (maybe it’s because of my job?), also from my friends – about how they fought for their money with an evil merchant. Of course, it’s a great way of getting back what you paid for a faulty product or service, but before you initiate it, it might be worth knowing what it means for the seller and why it’s sometimes better to ask them directly for a refund, without getting banks involved in it.
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Chargeback – the return of funds to a consumer. It’s his protection guarantee and last line of defence. Chargebacks occur mostly due to fraudulent activity or consumer disputes.
A chargeback is usually requested by the cardholder and initiated by the card issuer. Most common reasons are that a consumer doesn’t recognize a specific transaction or isn’t satisfied with the purchased service/product and wants his money back.
Merchants usually prefer refunds, which are the same from the customer’s point of view (he gets his money back), but a lot better for the ebusiness owners. Merchants have to pay a relatively big fine for every chargeback; furthermore, lots of chargebacks make a merchant a risky one for acquirers, which can lead even to the end of their cooperation.
Of course if a chargeback request is unfounded, the merchant can prove this (he has a time limit to respond to a chargeback request) and convince the acquirer that there’s no reason to reverse the transaction.
Bottom line, being a cardholder you have the full right to request a chargeback whenever you think you deserve your money back. However, asking for a refund will make you more friendly towards the merchant and there’s a good chance you’ll get your money back (that is if you have a good reason).
And being a merchant… Simply be aware of this mechanism and provide good quality service or/and products.
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A chargeback means returning funds to a customer. It’s forced by the issuing bank and causes merchants a lot of problems, wasting their time and money. So obviously nobody likes a chargeback. Most merchants will do a lot, to avoid them. Even if their policy doesn’t allow refunds, they’ll probably give one to a client just to make him cancel the chargeback request.
So how to avoid chargebacks?
I won’t delude you that there is one efficient method. Sorry, chargebacks are troublemakers for all merchants and it’s going to stay that way – at least for some time. But it doesn’t mean, that you can’t do anything to avoid them.
If you get a chargeback request, than you usually have some time to prove your innocence. This means convincing the bank, that the client’s request is unjustified.
But that’s fighting the symptoms. It’s just saving your hide, not avoiding the danger. Let’s focus on the causes.
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Refund – it’s the money (or its transfer) which a customer receives from a merchant after making a complaint. The whole process usually looks like this:
- a merchant receives a complaint from a customer
- after analyzing the complaint, the merchant decides whether to refund the whole transaction, just part of it or refuse to give back any money at all
- if the merchant decides to refund, it makes a proper request-usually instructions are passed to the acquiring bank via PSP
- the acquiring bank contacts the issuing bank, which pays the money to the customer
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