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How To Reduce Chargebacks On Your Magento eCommerce Store

December 28, 2018 0 Comments RSS Feed

How To Reduce Chargebacks On Your eCommerce StoreChargebacks are a safeguard for shoppers, and from that perspective they are good for eCommerce. They reassure shoppers that when they give their credit card details to a merchant or payment processor, their money will be returned if they aren’t satisfied. But chargebacks put strain on eCommerce retailers, who have occasionally been driven out of business by excessive chargebacks.

A chargeback is the forced return of money from the retailer’s account to the shopper. They can be initiated by the retailer to make a refund, but it is shopper-initiated chargebacks that are problematic for retailers. Many chargebacks are fraudulent, but I want to focus on reducing “genuine” chargebacks. Shoppers initiate chargebacks for several reasons:

  • They didn’t receive the goods they ordered.
  • They received the goods but they were defective or otherwise unsatisfactory.
  • Buyers remorse — they changed their mind about the purchase.
  • So-called “friendly fraud”, in which the shopper agreed to make a payment, but has forgotten about it or didn’t understand what they were agreeing to.

The immediate impact of a chargeback is the loss of a sale, and possibly of the goods that have been delivered. But that isn’t the most onerous impact of chargebacks: retailers have to pay a fee for every chargeback they didn’t initiate, so in addition to losing a sale, retailers lose revenue from other sales too.

The credit card industry expects chargeback rates to be less than one percent of total transactions. If an eCommerce business even approaches a one percent chargeback rate, the credit card providers may decline to accept payments, which can be devastating to the business.

It is in the interest of all eCommerce businesses to keep chargeback rates low.

Make it easy for customers to request a refund.

A chargeback should be the option of last resort. Customers are often happy to deal with the retailer directly if the process of requesting a refund is obvious and not too onerous — don’t make people wait on hold for hours, for example.

No one likes to lose a sale, but the shopper has the power here, and it is better to lose the sale and make a refund than to risk a chargeback.

Have a customer-friendly return policy.

Free returns are a financial drain on an eCommerce business too, but that may be a better option than suffering a chargeback. A customer who knows they will have to pay a large shipping fee to return an item may be tempted to use a chargeback instead.

Make sure shoppers can get in touch with you.

Provide a channel by which customers can get in touch and don’t make them wait for support. It is often possible to work out a satisfactory resolution to a dispute.

Describe goods accurately.

Chargebacks often occur because the goods the shopper receives are not what they expected. It is not possible to force customers to read copy and think about what they are buying, but clear product descriptions with images and video help to get the message across.

Make charges with a name customers recognize

One of the most common causes of chargebacks is shoppers failing to recognize the transaction on their credit card bill. This might be because the retailer makes the charge under a different name than the brand the shopper is familiar with, or that the shopper has forgotten making the purchase.

To reduce the likelihood of this type of friendly fraud chargeback, use a familiar brand name for charges or make it clear to the customer that the name will be different on their bill.

Chargebacks are an irritation to eCommerce retailers, and sometimes a disaster, but it is possible to keep chargebacks under control by giving shoppers clear alternatives and a way to get in touch.

Posted in: eCommerce