Chargebacks are a serious issue for both the merchants and the banks. In the past few years, businesses worldwide have recognized these facts and employed strategies to minimize their effects on their profits. Nevertheless, according to a recent survey by master card, $615 million have been lost to charge backs, and it is expected to rise by $117.47 billion by 2023. As you can see, these numbers will dent any business’s profits and operations. Accertify offers a chargeback management solution that can help you improve your win rates. If you want to manage charge backs in 2022 effectively, then the following guide is for you.
Process of a Chargeback
In most instances, a chargeback is initiated by the customer or credit cardholder. It begins with a dispute regarding a specific payment when consumers contact their bank or credit card company. Depending on details, the bank then involves the merchant to whom the initial payment is made. Considering all the facts and evidence, the bank then makes a decision. If it’s in favor of the consumer, the amount is refunded, and if the merchant is innocent, the original payment remains. However, the process can get messy and take time to make an accurate judgment.
Following are the parties involved in a chargeback dispute management;
- Cardholder: The consumer or cardholder is the one who initiates the dispute by contacting their credit card company.
- Merchant: The person who sold a service or the product is at the center of the dispute. They can either accept it or choose to fight against it.
- Bank: The issuer of the card is the one who acts as a mediator to solve the dispute. This can be the bank or the credit card company.
These are the main parties involved in the dispute; however third parties managing payments on behalf of the consumer and the merchant can also settle the dispute.
Reasons for Chargeback Claims
Nearly all chargeback claims are due to the following three reasons:
- Criminal fraud: Third-party frauds or payments made with a stolen card are the top reasons a customer will push for a chargeback. These are also the ones that are easily detectable and preventable.
- Business error: Any errors or discrepancies on behalf of the merchant are also eligible for a chargeback. In such cases, merchants are the guilty party and bear the loss.
- Common fraud: Also known as friendly frauds, they are made after the financial transaction. This is the reason why they are challenging to catch and process.
For merchants, it is essential to employ strategies to limit chargebacks, so their revenue isn’t affected. The best way to do it is to hire a firm that can efficiently manage all online payments and other disputes. However, you can also use specialized software that helps in chargeback management. Both ways are effective and help your business to cope with unnecessary losses.
Chargeback management is all about streamlining your online transactions and minimizing your mistakes. The above guide is all you need to help you with the scenario in 2022.