Ecommerce merchants are more susceptible to customer disputes than their brick-and-mortar counterparts. Because of this, it’s important to take the necessary steps to prevent disputes from happening.
What are Disputes and Why Should I Prevent Them?
A dispute, also known as a chargeback, is a transaction reversal that is meant to serve as a form of consumer protection. It starts when a cardholder contacts their issuing bank when they believe there is a fraudulent transaction, unfair service, unreceived merchandise, or many other reasons. If the issuing bank finds the claim to be valid, they issue a dispute.
When a merchant receives a dispute the revenue from the transaction gets returned to the cardholder, you lose the merchandise or service provided and get hit with a dispute fee. Then the merchant has the option to respond to the dispute to try and regain the revenue from the transaction. Even if the merchant wins the dispute and gets the money back, you will still have to pay the fee associated with the dispute.
The goal of this process is to protect the cardholders, but some cardholders take advantage of the process. This leads to the merchant receiving invalid customer disputes and unnecessary revenue loss. To protect your hard-earned revenue, customer relationships, and retain your merchant account, it is important to try and prevent disputes from ever happening.
Here are seven tips on how to do just that:
1. Make Sure Your Product Descriptions are Accurate
For physical products sold online, merchants must convey the product as accurately as possible. Doing so is vital, because the product that is viewed online may not meet the customer’s expectation when it arrives. This can lead to a high number of costly product returns. Or even worst, a high number of ‘product not as described’ customer disputes.
Put yourself in the customer’s shoes. The customer only knows what you have told them about your product. They have never touched, tried on, held, or even truly seen the product until after they completed the transaction and the product is shipped to them. This is why accurate product photos and descriptions are important tools for ecommerce merchants to stop excessive returns and disputes.
2. Set Up Excellent Communication Channels
Communication is a key element in any healthy relationship that helps makes it work. The relationship between the merchant and a customer is no different. When a customer has been trying to reach a merchant about a problem with no response, they can easily turn to the dispute process to solve the problem.
To avoid a frustrated customer turning to the dispute process instead of working through the merchant, it needs to be as easy as possible for the customer to find your contact information. Make your customer service phone number or contact information is obvious on the website, in the footer of emails, and even put it in the merchant descriptor that is on the cardholder’s statement. Anything that will make it easier for the customer to contact you instead of their bank.
3. Easy Returns and Clear Return Policies
Ecommerce shopping is easier and more popular than ever before, but it also means more returns for merchants. As we described about earlier, one challenge that ecommerce merchant face is they don’t get their product physically in front of the customer until after the transaction and shipment of the product. Thereby resulting in a higher amount of returns. The logistics and cost of returns have been an ongoing strain for merchants, but making the return policy more restrictive may not be the answer.
A strict or an unclear return policy that prevents the customer from returning product easily and within the time restraints may increase disputes. When conflicts arise around returns, the customer may feel justified and motivated to get their money back in any way they can. Chargeback fraud is when a customer uses the dispute process to regain the transaction dollar amount while retaining the product or services rendered. Frustrated customers may commit chargeback fraud to get their money back from a rejected return.
4.Fraud Deterrents at Checkout
True fraud is when a stolen card is used and the transaction is disputed by the true cardholder. Merchants are liable to prevent these fraudulent purchase from happening. There are a few easy steps merchants can take to prevent true fraud disputes.
Verify Billing Addresses with AVS
Address Verification Services or AVS is a commonly used fraud prevention tool that matches the billing address given at checkout against the address that the card issuer has on file. Its purpose is to ensure that the person making a purchase is indeed the valid cardholder.
Use CVV to Deter Most Fraudsters
Another common method of ecommerce fraud prevention that merchants can use is to require the card security code at checkout. These will deter fraudsters that only have the credit card number.
Both AVS and CVV requirements are widely used by ecommerce merchants to verify card-not-present transactions and should absolutely be included in the checkout process.
5. Helpful Customer Service
71% of consumers end a business relationship due to poorly designed or non-existent customer service policies. Well trained and responsive customer service can help prevent disputes from happening. If a customer reaches out with a problem and the issue is resolved quickly and amicably, the customer will not look for another way to take of the issue. In the opposite situation, a frustrated customer that had a bad experience with customer service or the customer service is not responsive, they will turn to the dispute process to take care of the problem.
6. Clear Merchant Descriptors
Friendly fraud is when a customer accidentally disputes a charge they actually authorized. This can result from family member making purchases, simple forgetfulness, or unclear merchant descriptors. Merchant descriptors are what’s displayed as the merchant’s name on a cardholder’s statement. Unclear or vague descriptors can cause a cardholder to panic and dispute a transaction thinking it was fraudulent when it is really not.
Merchants should make sure to display the name of the company that the customer will recognize instead of a legal name – such as a parent organization or the name recognized by the IRS. Merchants should also provide a way from the customer to contact them. By having an email address, phone number or URL where they can contact customer service will allow customers to directly contact you and ask questions about the transaction before disputing.
7. Logistics and Shipping
Another challenge that ecommerce merchants face is shipping the product effectively and quickly. With expectation set like Amazon Prime’s two-day shipping, customers have a lessened tolerance for long shipping times. If your product takes too long to ship the customer may think that you never shipped the product to them or they never received the product. This can lead them to file a ‘product or services never received’ dispute.
To prevent this type of dispute make sure you are communicating with your customer through the processing and shipment of their purchase. Allow them to track their package or see the status. It is also helpful if you can provide them with a delivery confirmation to let them know that the package successfully delivered.
Prevent Disputes to Protect Your Bottom Line
When it comes to disputes, an ounce of prevention is worth a pound of cure. So taking steps like those described above to prevent disputes is a smart move to protect your bottom line. For the disputes that do slip through, make sure you have a stockpile of the right chargeback response templates to help you create the most compelling rebuttal possible.