Whether you have a well-established Internet business or are just considering the possibility of going online, the chances are high that you have heard a lot about chargeback and therefore we need chargeback prevention.

This is not to say that brick-and-mortar stores are unfamiliar with this risk. While most widely discussed (and feared) in the context of online shopping, it has become ubiquitous enough to be perceived as haunting. Fortunately, chargeback prevention is there to relieve your burden as a merchant.

What Is Chargeback?

What Is Chargeback

If you look at the definition of “chargeback,” you’ll probably find it very innocent. Indeed, the term is used to describe situations where funds are repaid to the customer after a transaction has been effected. The reverse payment is ordered by the client’s bank. The primary purpose of this mechanism is to give customers a sense of security and deter merchants from selling goods and/or services of inadequate quality. Finally, it might prevent credit card fraud.

With this in mind, why are chargebacks something to minimize, if not avoid altogether? Here are the key reasons:

  • High chargeback rates mean little trust on the part of banks and other financial institutions and, therefore, unfavorable terms and conditions for your business
  • Chargeback claim processing is associated with costs to be born by the merchant
  • Customers can inadvertently abuse the opportunity if they forget about a purchase they made or get confused about the delivery schedule and claim a chargeback
  • Fraudsters sometimes request chargebacks for successful purchases to get goods for free that’s why chargeback prevention is essential.

How Chargeback Prevention Work

How Chargeback Alerts Work

If you look at the market of payment security products today, you’ll probably notice that some products showcase anti-chargeback features, often referred to as chargeback prevention. The term can be defined as notifications sent to the vendor whenever a customer initiates a chargeback.

According to the basic procedure, the next step is for the customer’s financial institution, i. e. bank, to process the claim and probably order chargeback. While it is not legally possible to break the cycle and take away the lawful opportunity (remember, it was meant to ensure merchant transparency in the first place), getting notified enables the vendor to respond.

Solutions such as Ethoca enable you to become involved in the dispute before it becomes official and costly. Within this valuable window, you can offer a solution that will satisfy both you and the customer, such as a return or refund, without increasing your chargeback ratio and risking your reputation with banks, payment processors, and Visa/Mastercard. The costs of processing a claim are thus eliminated in case of success and your payment processing fees remain minimal.

An Investment in Trust and Sense of Control

The return on investment (ROI) is impressive

Chargeback prevention directly minimizes costs and prevents unfavorable treatment of your business by financial institutions. And there’s more: chargeback alerts not only save your valuable funds but also have the potential to improve customer trust dramatically. Most users (excluding fraudsters) will appreciate your involvement and determination to resolve any issues through negotiations and active participation. After all, what they want is not losses on your part but satisfaction.

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