Chargebacks
Chargebacks were designed to protect shoppers from unauthorized transactions and dishonest merchants.
They result in the return of funds to a shopper and the loss of sales for businesses. The difference, however, is that with chargebacks, instead of contacting you for a refund, the shopper contacts directly their bank to request a refund. If the bank approves the request, the business is “forced” to return the funds to the shopper.
The chargeback can be initiated for several reasons which may include criminal fraud, chargeback fraud, and friendly fraud.
• Chargeback fraud is a purposeful misapplication of chargeback rights. This occurs when a shopper requests a chargeback with malicious intent to keep the product or service acquired while enjoying a refund of the transaction amount.
• Friendly fraud is also a misapplication of chargeback rights but is not necessarily intentional or malicious. This may occur when a shopper disputes a purchase they made and forgot about or simply did not recognize on their account statement. Another frequent reason for friendly fraud is the shopper misunderstanding the return policy.
Besides the loss of related funds, chargebacks may have serious consequences for your business, including being blacklisted by credit card issuers and Payment Service Providers.
In this case, you may end up working with expensive, high-risk payment processing companies.
How can Nexway help protect you and your business against chargebacks?
To help you fight fraud and consequently prevent chargebacks, Nexway uses certain prevention methods and also works with chargeback alert networks.
Chargeback prevention methods
• Ensuring the billing descriptor is easily recognizable (indicated in the confirmation email and on the invoice). The billing descriptor is what appears on the shopper’s bank statement along with the transaction amount.
• Make order cancellation easy for the shopper, as the impact of cancellation is much lower than a chargeback.
• Providing excellent customer service by promptly answering phone calls and responding to emails.
• Providing shoppers with terms & conditions of service and refund terms, before purchases are made (on the checkout page).
• Notifying shoppers before charging them for recurring payments.
• Focusing on the true causes of chargebacks, then dealing with any internal issues that may trigger them, for example, duplicate processing, service not provided, etc.
Chargeback prevention alerts
Businesses tend to be informed of fraudulent transactions and chargeback claims by the banks about three to six weeks, sometimes longer, after they occur. This is too late for you to actually stop the fraud or the chargeback process.
Nexway works with chargeback alert networks that collaborate on a global level with card issuers and merchants to prevent chargebacks. These networks can inform us in near real-time of confirmed transaction frauds and disputes. We receive these chargeback alerts through an automated process using APIs which allows us to respond promptly (within 48 hours) and perform any needed action to prevent the chargeback to occur:
• Refund the shopper before your business sustains a chargeback.
• Send an email to the shopper informing them of the situation. If they would like to continue with the order or service, they are invited to contact us.
• Analyze the chargeback alert and check for other fraudulent transactions.
• Update our fraud rules to prevent future frauds.
Chargeback management
In case the chargeback finally occurs, despite all the prevention actions described above, Nexway will dispute on your behalf those chargeback claims.
Upon reception of the claim, we will analyze the reasons for the claim and check whether it can be disputed based on the information we have. We will, of course, handle the dispute for you when relevant:
• Send the information to the card issuer for review and eventually rejection of the chargeback claim. In that case, the shopper will be charged again to give the money back to you.
• If the chargeback dispute is unsuccessful or if it cannot be disputed, we contact the shopper directly through 15-day interval emails (to avoid canceling the order). This can lead to chargeback regularization where we can make another transaction with the shopper’s agreement.
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