High-risk tips: when to mitigate or fight chargebacks – and how to do it –
As a high-risk merchant, there are a few things that will be more difficult for you than for most low-risk businesses. Finding a way to accept credit cards for your products and services is a big one. You’ll need a high-risk merchant account, and on top of that, you’ll need to find a payment gateway that works for your high-risk business type and your shopping cart. Unfortunately, chargebacks will also be a big part of the e-commerce landscape for you. This is why so many ask us the question, “how can I fight chargebacks?”
At Tasker Payment Gateways, we’ve decided to create an article on this topic to help you along the way.
Focus your efforts on chargeback mitigation
If you sell high-risk products online, you really should focus on mitigating chargebacks rather than fighting them. While we will give you some very brief pointers on how fighting chargebacks can work for high-risk e-commerce, the best defense against chargebacks is mitigation. To be successful at mitigating chargebacks, you need to set a strategy in place that allows you to increase the number of successful sales while reducing false positives.
A successful chargeback strategy should work to remove entirely preventable chargeback triggers, while still identifying the source of every chargeback. The good news is that, while the process might sound complicated, our recommendations and partners can help. We can help you fight chargebacks the best way you can: mitigation. Feel free to contact us anytime for a no-commitment talk about your business and how we can help you mitigate and reduce your chargeback rates.
How to fight chargebacks
Chargeback re-presentment is the technical term for how you dispute or “fight” a chargeback. It’s the process that you, as the merchant, can use to potentially retrieve money that was taken from your account due to a chargeback. However, the first step in fighting chargebacks is simply deciding whether or not it’s worth it. For example, if the chargeback is on a small pipe and glassware accessory, it might cost more in terms of time and effort to fight the chargeback than what you’ll get back.
When and how to pick your battles is one of the more important things to decide upon. Regardless of whether or not you choose to fight a chargeback, you should block known fraudulent customers from repurchasing.
Use a chargeback re-presentment partner that has experience in chargeback research, data, and support. A reliable chargeback mitigation company can give you a significant leg up when representing chargebacks as well. With our relationships and insights into the industry, we will be able to recommend solutions that will set up seamless communication between issuers, banks, and processors. This will allow all chargeback data to go where it needs to quickly. The right vendor will help you avoid wasting internal time and resources on lost causes and will enable you to focus on your business.
Cardholder and payment approval information is perhaps the biggest key to winning any chargeback fight. This is especially the case for e-commerce, where most payments are what’s called card-not-present transactions. Proving that the payment was authorized and the customer is the same as the card owner is the best way to fight chargebacks. Your payment gateway and customer-relations-manager (CRM) are your main allies here. This is where you can find customer information or PII data (email, address, name, date of birth, etc.), purchase history and activity, shipping details, and contact information. To win a chargeback dispute, you’ll need evidence.
Fighting chargebacks isn’t always the best way to go to reduce the true “all in” cost of chargebacks. The fact is that, too often, you may not win a chargeback dispute. No doubt you’ll win a few, but the best way to go on the offensive when it comes to high-risk chargebacks is through mitigation. This will put processes and systems in place that check and reduce chargeback probabilities before they happen. JP Morgan found that merchants usually win 40% of chargeback disputes, resulting in an approximate 27% net recovery rate (page 12 of the report). Mitigating, or preventing chargebacks from happening in the first place, goes a long way toward filling in the remaining holes in your bottom line.
The best way to reduce chargebacks
We recommend having a process set up for disputing chargebacks, or re-presentment for when a customer inevitably issues a chargeback. Having said that, you’ll only get back about 27 percent of what’s lost on average, which means that mitigating chargebacks is the better option. The great news is that there are plenty of ways you can actively go about reducing chargebacks, and we’ll list a few below.
Set your customers’ expectations by describing your products fully
As a high-risk site owner, you want to make extremely clear what it is that you’re selling. You’d be surprised to know how many chargebacks occur because the customer expected something other than what they got. If you sell vape and e-liquid online, for example, there could be color mix-ups, or size, or flavor of e-liquid – you name it. When there’s a difference between customer expectation and product, the likelihood of chargebacks increases. Essentially, one of the best things you can do to reduce chargebacks is to describe your products fully and in great detail.
The better your description is, the less likely it is that your customers will expect something other than what they get when they buy your products. It’s a super simple step that also has some helpful by-products. As a high-risk e-commerce site owner, these more expansive descriptions are also going to be good for your high-risk SEO. In turn, this will increase your online reach and customer pool. There’s no downside to being highly descriptive of your products and services. Google might reward your efforts with noticeably better SEO too.
A side note if you sell digital products: as your product isn’t physical, you’re likely to experience a higher amount of chargebacks due to the issue of expectations versus product. This means that extensive and accurate descriptions are doubly important for you. You’ll want to set your customers’ expectations appropriately for your digital products.
Set up your pre-sale tools properly
It might sound very basic, but setting up your pre-sale tools to work in your favor is a great way to mitigate chargebacks. There are different tools you can use, but we’ll cover two of the more popular ones.
For high-risk e-commerce, card-not-present transactions are the most common payment type. This means that requiring card code information is an important step to take toward reducing chargebacks. Depending on the card type, this is also referred to as CVC, CID, or CVV2 verification. By requiring the use of card codes, you’ll better ensure that the customer has the credit card in their hand when completing a purchase. This will reduce fraud.
The Address Verification System (AVS) is another excellent tool to use to minimize fraud. What AVS does is confirm that the digits in the address the customer enters for their billing information are what the card-issuing bank has on record. This simple step can radically mitigate fraud and chargeback issues. AVS can’t tell if your customer lives on Main Street or Willow Road, but it can tell if they enter their street number and zip code correctly.
Get help from experts to set up a chargeback mitigation plan
As you know, payment processing and accepting credit cards online can be complicated. Chargebacks take this up a notch with paperwork and documentation needed for you to dispute them. However, with the right partner at your back, you can put a chargeback mitigation strategy in place that can significantly reduce your chargeback rates without draining your time or resources. With expertise and knowledge in the high-risk payment field, we can help you drastically reduce your chargeback rates and stop you from losing money unnecessarily. We do this by recommending chargeback mitigation solutions that work correctly for your high-risk business type and situation.
If you’d like to discuss how our recommended solutions can help your high-risk e-commerce business, please get in touch. We offer no-obligation recommendations at no cost to you. You can reach us by using the short contact form below.