The Complete Guide for Chargeback Protection

Chargebacks do protect customers from a wide range of problems with purchased goods and services. Nonetheless, for a merchant, a chargeback is synonymous with damage. This article will discuss how to prevent chargebacks both automatically and manually.

The chargeback process

A chargeback is a legal right that every customer has to get their money back if the service or product was not as it should have been according to the agreement with a merchant, or if it was missing or not provided. It makes no difference whether a customer is a client of a traditional bank or an online bank.

There are several types of chargeback reasons:

Technical reasons

It is usually the result of a technical error on the merchant's website, which resulted in a duplicate purchase or the purchase of an unwanted service or product. 

Delivery reasons

While delivering the package to the customer, delivery issues such as damage, late delivery, and package loss can occur.

Quality reasons

It occurs when the quality of a sold product or service does not match the description when the customer receives it.

Fraud attempts

The only reason for the chargeback that has no legal basis is fraud. When a customer commits fraud, he or she falsely claims that a service or product is subject to one of the reasons when, in fact, it is not. In this manner, a person attempts to deceive the merchant and obtain both the product and their money back.

Chargeback process for a customer

To initiate a chargeback, a customer must contact their credit or debit card company, such as Visa, MasterCard, or American Express, to dispute a bill transaction. When filing a dispute, a customer must specify the reason for the chargeback and provide valid proof in all Indian countries. To protect cardholders, the majority of disputes are resolved in the customer's favor. The dispute ends with money being returned to a customer's bank account.

Chargeback process for a merchant

Meanwhile, the same chargeback process for a merchant yields completely different results in different parts of the world. To begin with, each chargeback has a cost, and a merchant must pay fees to an online payment gateway service for each case. As a result, a merchant pays back the money for the purchase, and the fee to a bank, and does not receive the product or service that a customer ordered. It's a triple setback.

Second, if chargebacks are a frequent occurrence in a merchant's business, the merchant account may be classified as high-risk or even terminated. As a result, chargeback prevention must be used.

The three types of chargeback protection

Chargeback alert services

Alert services typically freeze the chargeback dispute and notify the merchant, giving the merchant time to resolve the issue personally. To protect our merchants, SifiPay, for example, provides a variety of chargeback prevention tools. 

Chargeback deflection

Before making a purchase, deflection services can verify a customer's identity to see if it is fraudulent.

Chargeback guarantees

In this case, a special provider acts as a guarantee and pays the chargeback costs.

Other ways to protect from chargeback

On a website, provide a detailed description of the service or product. Include photos, measurements, shipping options, and timelines, as well as a return and refund policy.

Maintain contact with a customer beginning with the purchase. Notify me of all steps between payment and delivery.

Provide a delivery tracking service to monitor the movement of purchased goods and protect yourself from loss.

Make refunds as simple as possible so that customers do not need to dispute a chargeback. We explain why refunds are far superior to chargebacks in this article.

How do you protect yourself against a chargeback?

First and foremost, ensure that all information on a website is complete, descriptive, and up to date. After that, consider a refund policy and its accessibility. Finally, we recommend that you implement chargeback alerts and fraud protection.

What are the conditions for a chargeback?

When a customer disputes a chargeback, they must provide a reason for doing so, as well as documented proof.

What is the final stage in the chargeback process?

The final decision is up to the card issuer, who has the option of resolving a customer's dispute or declining it.

How does chargeback insurance work?

The chargeback insurance service is linked to the fraud prevention service. While incoming transactions are being processed, it automatically verifies them and approves or declines them. If a chargeback insurance service approves a transaction that appears to be fraudulent, the service must reimburse the merchant for the chargeback.