Chargebacks are a tedious reality for every e-commerce business. It is important to understand the risks of chargebacks in order to protect your company from possible financial losses. Chargeback protection is a type of chargeback insurance that ensures that an e-commerce merchant will get their funds back in the event of a fraudulent chargeback. This article will discuss what chargeback protection is, the main causes of chargebacks, and why e-commerce businesses should have it.
What Is Chargeback Protection?
Chargebacks are a type of transaction where a customer files a claim against the company for some kind of negative action. The merchant’s bank must approve the claim, and then the funds are returned to the merchant. These claims from customers can cause great financial loss and disruption in an e-commerce business.
While chargebacks are relatively common, there are many reasons why charges may be disputed which is exactly what chargeback protection entails. Chargeback protection ensures that your business will get these funds back should they be wrongfully credited. Chargebackhit is a unified service with a layer of proprietary technology to boost the efficiency and ROI of chargeback prevention. The service will help you grow your business without worrying about frequent chargebacks.
One more way that you can protect yourself from chargebacks is to insure them through chargeback insurance. This means that you pay a monthly fee for a specific coverage period, which will make sure that you will get your funds back should there be any kind of chargeback.
What Are The Main Causes Of Chargebacks?
The main causes of chargebacks are friendly fraud, criminal fraud, and merchant error. Chargeback fraud comes from customers who file claims against the company in order to get a refund on the original purchase. Below there are the main reasons for chargebacks in today’s eCommerce.
Criminal fraud is when a criminal uses a stolen identity to purchase from a merchant. This can take many forms, and it is mostly related to eCommerce. Identity theft is becoming increasingly popular in today’s world, and it can occasionally affect businesses.
In one common case, a criminal will access someone else’s credit card information. They will then proceed to buy something online with that person’s card information. Since the criminal has never had the card in their possession before, they can be charged with identity theft. Because of this, the credit card company ends up charging back the payment for the product or service purchased because of possible fraud or a stolen credit card number.
Friendly fraud, also known as chargeback fraud, is when the customer themselves makes a purchase and then disputes the charge after the fact. This means they are trying to get their money back for a product or service they purchased. Incidents such as these happen due to certain reasons. Misrepresentation by merchants, high shipping or handling fees, and defective products are just some of the common things that may cause a customer to want to dispute their purchase. Some customers also cancel payment because they simply do not want to pay it or forget that they made this order.
Merchant error is where the merchant makes mistakes and accidentally sends the wrong product to a customer. Another reason is when a buyer was wrongly charged twice for the same order.
Merchant error is a much less common cause of chargebacks, and it is also not as damaging to an e-commerce business. In this case, a customer may dispute a purchase because they did not receive their product or service. Sometimes they will even dispute an order that was placed by mistake. These are typically resolved easily with a little bit of communication between the customer and the merchant to make things right again.
Why Should E-Commerce Businesses Have Chargeback Protection?
Chargeback protection is a tough decision for any e-commerce business because of the costs involved. Many e-commerce businesses choose not to get chargeback protection because they believe it has too many risks. Instead, these businesses will invest their money in fraud prevention software or services that help identify risky transactions.
However, this ineffectively protects businesses from chargebacks. These payments are an unfortunate reality for any e-commerce business. Because of this, chargeback protection is the thing that should be seriously taken into consideration by any business owner looking to protect their money and prevent account suspensions.
Any e-commerce business needs to have chargeback protection because the losses incurred in chargebacks are very costly. In fact, a merchant can lose much of their revenue due to submitted chargebacks. This can be a huge financial strain, and it is also something that you cannot afford to take lightly.
Moreover, a high chargeback rate is bad for your business. In this case, merchant chargeback management protection gives a company an opportunity to spend less time managing issues and disputes and much more time to grow up the business.
The Bottom Line
Chargeback protection is a good solution to help prevent losses from chargebacks. It is still best to use fraud prevention software as well, but chargeback protection can help a company stay afloat during a major dispute. Chargeback protection is important for any e-commerce business that takes its company seriously.
Chargebacks are inevitable, and they can be very costly if they are not dealt with properly. By having the right protection against these fraudulent purchases, you can keep your head above water and make sure that your business continues to grow. Chargebacks are a recurring problem in the e-commerce industry and something that all merchants should take into consideration when planning their business strategy.