Chargebacks
AKA
Claw-Backs
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Learn more about what
they are and how to help prevent them
First of all Chargebacks can happen regardless of what
you are selling or how you run your business and are
pretty much inevitable. Nobody has a 100% safe business
when it comes to Chargebacks and it's the legal right
of every credit card holder to do one. That doesn't
mean that by doing one with are being fair. People will
either deliberately Chargeback as they are pulling a
fiddle, cannot remember what they purchased or cannot
be bothered to ask for a refund.
As previously stated it is not possible for you to
avoid Chargebacks completely, however, the information
in this section could help you reduce the number of
Chargebacks you may receive.
What is a Chargeback?
If a merchant cannot fulfil its obligations to its
customers via product delivery, replacement or refund,
or alternatively a card has been used fraudulently,
the genuine cardholder is likely to return to their
card issuer to begin a Chargeback of any amounts paid
in advance of product/service delivery and fulfilment
or to dispute unrecognised transactions that have
appeared on their statement.
In the normal course of business, Chargeback’s
are passed from the issuer (who credit their card
customers account) to the acquirer (who is debited
by the issuer), who in turn would return to the merchant
to either gather sufficient information to defend
and unwind the Chargeback claim, or to recover monies
paid in Chargeback’s. Unfortunately, if in the
meantime the merchant has gone out of business the
Chargeback’s are unlikely to be defendable and
we (or the Acquiring bank) will stand the loss.
This is why we implement rolling reserves and deferred
settlements, to essentially mitigate this exposure.
Transaction authorisation does not prevent
Chargebacks
Authorisation of a transaction does not guarantee
payment; it will only check the availability of funds
at the time of the transaction and that the card has
not been reported lost or stolen at the time of authorisation.
Chargeback Process
Please find below information on the basic Chargeback
process:
- One of your custoemrs has
a problem with a transaction on your website.
- The custoemr informs their
card issuer of the problem, and asks for their money
back
- The card issuer does some
research to see if the shopper's demand is reasonable
- If the customer seems to have
a case, the card issuer makes a provisional payment
to the shopper
- The card issuer starts the
chargeback process, and obtains funds from the acquiring
bank
- The acquiring bank sends a
'Notification of Chargeback' and a 'Request for Information'
to you
- You receive an e-mail that
is the Request for Information (RFI).
- If you ignore the RFI the
chargeback automatically proceeds unchallenged and
the money is gone
- If you reply to the RFI we
forward any information you can give about the transaction
to the card issuer
- The card issuer looks at the
information you have given and follows the rules associated
with the card
- The card issuer decides if
the information you provide satisfies their criteria.
If your information does satisfy the criteria. You are paid for the transaction
after a certain period of time
If you fail to satisfy the criteria,
or arrives too late, the chargeback is automatically
valid and the bank pays the card issuer from your
account. We then charge you an admin fee
for processing the chargeback.
Common reasons why a Chargeback may occur
- Processing errors
- Duplicate processing
- Incorrect account numbers
- Claims of non service or merchandise
not arriving
- Claims of non cancellation
of recurring payments
- Merchandise or service not
as described
- Defective merchandise
Customer Service
One way to reduce the number of Chargebacks is to
provide good customer service and have a high quality
of goods/services offered, as this will reduce the
number of cardholders raising disputed transactions
with their card issuer. For further information about
providing high standards of customer service within
your online store refer to:
Fraud Prevention
Fraud Prevention plays an important role in the reduction
of the number of Chargebacks you receive. Here is
a number of fraud prevention facilities and procedures
listed below:
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