Chargebacks are very important for customers to be protected against poor businesses. This clear path to getting a refund for a poor item or service when the business is dragging its heels is a huge help for holding businesses accountable. As a result, many payment methods have made it quite simple and quick to request and receive a chargeback, with the business on the other side footing the bill for any chargeback fees.
However, there is reportedly a rising trend of customers misusing this customer protection measure. As was reported by the BBC, there has been a rise in this kind of “friendly fraud,” in which customers issue chargebacks through their card companies claiming that their purchases weren’t made by them. Of course, the fraud element comes in as these claims are false, and the customer is essentially getting the goods for free through a chargeback.
It’s a growing issue, and one that businesses increasingly need to ensure they’re protected against. Given the state of play of business these days, the path forward can be tricky. After all multiple payment methods with differing chargeback protections needs to be incorporated by many businesses – especially those that operate online. With this being the case, what protections are available, and how can businesses better protect against chargebacks?
A Need to Accept Multiple Payment Methods
In the UK, the main form of payment method across commerce is the debit card. Larger purchases and online shopping see credit cards rank quite highly, but debit cards remain the dominant method. Even so, more and more Brits are exploring different, more modern payment methods for ease of use, convenience, extra protections, and heightened online security. So, businesses are encouraged to also embrace an array of payment methods.
Cart abandonment rates are already high online. One of the easiest points of friction to address that chip away at these high rates of lost sales is to offer multiple payment methods. Sure, almost all British customers have a debit or credit card, but not all of them want to use it online or go through the process of putting in the details. By integrating mobile payments, eWallets, gift cards, pre-paid cards, and more, the friction is greatly reduced.
It’s an approach that makes it easier for customers to spend their money, and can be seen deployed across the board. Now, Visa and Mastercard cards, popular eWallet services like PayPal, and mobile wallets like Google and Apple Pay have become the core batch of options that customers want to see available. Microsoft, for example, accepts PayPal, cards, direct bank transfers, and payments from a customer’s Microsoft account. However, Microsoft has an offering that has become essential for millions.
Those businesses that are offering goods or services that are more specialist or entertainment-oriented should further lean into making payment accessible. This is why platforms carrying online bingo games are expanding their list of options. Now, anyone who wants to play bingo online can make deposits through Visa, Mastercard, Maestro, PayPal, Paysafecard, Moneybookers, and Skrill on top sites. Like Microsoft, but to a greater degree, wildly popular platforms that are above needing to appeal to customer preferences generally don’t bother, which is why Amazon doesn’t take PayPal or their fees.
How Top Providers Suggest Preventing Chargebacks
Much of the advice offered by top payment providers to stop chargebacks is based primarily around improving your business in the first place. Mastercard, for example, recommends that you reduce purchase confusion, connect to their Ethoca Alerts data system, and to analyse your account and the Fraud Insights section. Some card and bank providers automatically take chargeback claims to dispute resolution, which does give you a chance to respond before the chargeback.
However, as the figures would suggest, chargebacks are becoming much easier and more straightforward for customers to claim. Some providers offer more store-friendly setups for managing chargebacks. PayPal suggests that you implement the automated chargeback protection solution, which is based on fraud detection tools. Requiring customer authentication and having open and easy communication channels can also help.
Alternative Methods and Insurance
Businesses are encouraged to keep meticulous records on their sales and customers to ensure that they can protect themselves from chargebacks and claim against them. Using couriers that provide delivery proof, fraud prevention tools, payment methods with alternative methods to chargebacks, and offering good customer service are all atop the list.
However, you could also look to more specific offerings that help battle chargeback fraud more directly. The most obvious thing that you can do is take out chargeback insurance. This can give you a safety net for any costs that may come with chargebacks. Chargeback insurance will usually cover the transaction, fees, and losses in revenue. Often, insurance providers will require you to accept certain payment methods to enable them to track the moves.
While not a mainstream form of payment method yet, cryptocurrency offers the best possible path for businesses looking to tackle chargeback fraud. This is because chargebacks simply can’t be filed on the blockchain. All transactions are final, and the tech won’t facilitate a chargeback just because a user requests one. Of course, you’d need a strong refunds policy and good customer service to remain compliant with consumer protection standards.
Chargeback fraud is a real menace for businesses across the UK, and while most recommendations say that you should change your practices, there are other ways to protect yourself against chargeback-induced losses.
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