Let’s face it, chargebacks suck. They come as a surprise, they destroy your profit margin—if not your business—and many times they are used by your customers in an unfair manner. The most common question I hear over and over is “Should I fight every chargeback?”
Chargebacks are complex and there is rarely a one-size-fits-all approach. There are many things to consider when deciding whether or not to fight a chargeback. The first is whether the chargeback is fraud or non-fraud. If it’s fraud, is it a dishonest customer “cyber shoplifting” from you, known as friendly fraud or is it true fraud, the result of a stolen credit card? If it is non-fraud, why is your customer calling their bank rather than your customer service department? You must answer these questions before understanding the best approach for handling each dispute.
True fraud is pretty straight forward. Do not fight these. Why take up dispute with a cardholder who’s credit card has been stolen? This is a guaranteed way to piss off a good customer. This is also the reason I discourage the use of an automated chargeback solution. Fighting true fraud chargebacks will also hurt your reputation with your merchant processor.
Friendly fraud represents nearly 85% of all chargebacks. In the movie Confessions of a Shopaholic, Hollywood taught America how to defraud a company through chargebacks. In the physical world, we call this shoplifting. Online brands need to understand that failing to fight these chargebacks will likely cause this problem to grow. Many consumers now share on social media which companies fight friendly fraud and which ones do not. Using a responsible, rational decision making process gives a merchant the ability to fight friendly fraud with confidence.
The last chargeback category is non-fraud. This can be tricky and is many times a tell-tale indicator you have funk in your company. Introspection is the key here. Why are your customers going to their bank rather than your customer service department? Does your product suck? Do your customers know how to contact you? Do you have a problem with your billing descriptor? While I would encourage you to fight these, even more important is getting to the bottom of why your customer’s are charging back.
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