Chargeback Protection for Businesses in Canada, India, US, and the UK
One of the biggest headaches for any merchant who accepts credit cards, high-risk or not, is managing chargebacks. This is especially true for online businesses where the majority of credit card purchases are Card Not Present (CNP) transactions. Because neither the cardholder nor the credit card is physically present at the point of sale, CNP transactions are more at risk for fraud – including fraudulent chargebacks.
In 2016 online merchants lost an estimated USD $6.7 billion to chargebacks. 71% of those chargebacks were fraudulent, resulting in USD $4.8 billion in lost revenue.
What are Chargebacks?
A chargeback, also known as a reversal, is a form of consumer protection provided by a credit card’s issuing bank. It occurs when a customer contacts their credit card company to dispute a charge. If the credit card company determines that the dispute is valid, they will reverse the charge. When that happens, the customer’s credit card is credited the amount of the disputed purchase while that same amount, plus any fees and/or penalties, is debited from the seller’s merchant account.
Chargebacks are a powerful tool for protecting customers from merchant fraud and there are many times where it is warranted, including situations where:
- Customer did not receive the item / service they ordered
- Item / service was received but was broken or in some other way substandard
- Customer was billed an incorrect amount
- Customer does not recognize a charge on their credit card statement
Unfortunately, the same tool that protects consumers from fraud can also be exploited to defraud legitimate merchants.
How does Chargeback Fraud Hurt Merchants?
Chargeback fraud, ironically also known as friendly fraud, occurs when someone makes a purchase with their credit card and then contacts their credit card company to file a dispute once they have received the product or service that they ordered. Since credit card charge disputes are frequently conducted without notifying the seller, transactions are often reversed and debited from the seller’s merchant account without them being able to challenge the dispute.
The number of fraudulent chargebacks has risen by over 40% over the past two years and that number is only getting higher. Among customers who successfully file fraudulent chargebacks, 40% will do it again within 60 days and 50% will do it again within 90 days. Aside from the obvious loss of income, chargebacks negatively impact merchants in many ways, including:
- Loss of purchase revenue
- Loss of inventory
- Assessment of chargeback fees – often as high as $100 per reversed transaction
- If the percentage of chargebacks go above a certain threshold in a given month (usually 1%) significant penalties can accrue – often amounting to thousands of dollars
- Revocation of seller’s merchant account if chargebacks continue to go above an acceptable threshold
- If the seller’s merchant account is terminated, the business owner is placed on the MATCH list and unable to secure a new merchant account for five years or more
High Risk Pay Solution’s Chargeback Protection Helps You Keep More of Your Money
As merchant services specialists, we have helped businesses throughout the US, Canada, India and the UK significantly reduce both legitimate and fraudulent chargebacks. If you would like to learn more about how High Risk Pay Solution can help you reduce chargebacks and improve your bottom line, give us a call at 855-736-6460 or click here to request information online.