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HOW TO AVOID CHARGEBACK’S FOR ECOMMERCE
MERCHANTS IN CNP TRANSACTIONS
Chargeback is every merchant’s
nightmare. When a chargeback occurs the
merchant has to pay back the entire
transaction amount to the cardholder,
pay a chargeback fee to the bank and in
most cases, he will not get his
merchandise back. Chargeback’s can occur
due to credit card fraud or because the
customer is not happy with the service
or product.
The only victims of this process are the
poor ecommerce merchants. Since, the
merchants are penalised heavily for
something which is not their mistake the
only way out for them is: to reduce or
eliminate it, by taking some steps.
The reasons for chargeback’s can be
divided in to two broad categories:
1)
Customer Chargeback’s:
here the customers file for chargeback’s
because they are dissatisfied or their
card is charged twice for the same
transaction and so on.
2)
Fraudulent Transaction
chargeback’s: here the chargeback’s
occur because of a fraudulent
transaction in a customer’s credit card.
Preventing or reducing chargeback’s
because of fraudulent transactions
includes implementing security
mechanisms like “SSL Secure Order Form”.
These can also be supplemented with
additional security mechanisms developed
by MasterCard and Visa.
Other tips to reduce chargeback’s are:
1)
Always make all the
fields mandatory.
2)
Don’t accept credit cards
which are expired.
3)
Overseas addresses are
high risk business which is most
probably a fraudulent transaction.
4)
Look out for customers
who are willing to pay a lot more to get
their product quickly.
5)
Verify all orders by
email or phone. If this isn’t possible
then choose those orders amounting over
a certain threshold.
6)
Use address verification
services that is provided by the bank.
This is a fool proof plan because all
fraudsters will use a different shipping
address than the address mentioned
there.
7)
Having a locating system
using IP address will come in handy when
you are dealing with chargeback’s.
8)
You should ask the
cardholder to key in the 3 digit
security code printed on the back side
of your credit card, right next to the
signature.
9)
Spend a little more time
per transaction to find any suspicious
information like abnormal names,
telephone numbers or emails.
10)
Spending five minutes per
transaction to talk to the client will
eliminate any chances of fraud.
11)
Choose your processor
carefully.
12)
Make your customer’s
aware of how credit card fraud works, so
that they can also help you to fight
against it.
In the year 2006, over a million credit
cards were stolen. Therefore, taking
these steps will protect your business
from chargeback cases.
The fate of those ecommerce merchants,
who face several chargeback’s per month,
is not good. Either their processor will
terminate their account and give the TMF
status to them or in the worst case, the
merchant would have lost so much that he
will not be able to run his business any
more and is forced to close it down.
Once you get the TMF status it is
difficult for you to get another
merchant account from another provider.
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