Responsible merchants work hard to prevent chargebacks and fraudulent charges year-round. However, you should be even more vigilant during the holiday season. Due to the glut of shopping activity, professional con artists assume (correctly, in many cases) that their schemes will go undetected. The stress of the holidays can also frustrate legitimate customers and lead them to charge back their purchases. By implementing a few key safeguards, merchants can dramatically lower chargebacks and fraudulent charges this holiday season.
One thing that direct marketers (including infomercial promoters) learned long ago is that how quickly someone receives their product has a lot to do with what your return/chargeback rate is. Think about it: many, though not all, of the purchases people make are impulse-driven. They were sold by an ad, or a product grabbed their attention from a website. After placing such an order, some customers get second thoughts and rush to submit a chargeback.
If your product takes 6-8 weeks to ship, you are giving customers plenty of time to make this decision. But if you ship immediately and they get their hands on it in two or three days, the urge to chargeback is less powerful. In some cases, quick shipping really is the answer.
Make It Easy To Contact Customer Service
It’s become common in recent years for companies to limit access to live customer service representatives. Instead of giving customers a clear path to live support, companies prefer routing them through automated voicemail systems or online FAQ pages. But for however much money this might save you in the short-term, it is your worst enemy when it comes to deterring chargebacks. An angry, confused or frustrated customer does not want to deal with a machine. They want to know that somewhere within your company is a real person who will go to the mat for them and solve their problem.
For this reason, it makes no sense to bury your support reps at the other end of a labyrinthine phone maze. Instead, make it smackingly obvious how customers can bring their concerns to a human being.
Have a Straightforward Return Process
A simple product return is infinitely preferable to a chargeback. It’s less costly, involves no back-and-forth arguments with credit card companies and imposes no ongoing responsibilities on the merchant. Unfortunately, it’s not always clear how customers can return merchandise they are unsatisfied with. Companies make the return process confusing in several ways:
Lengthy lists of terms and conditions for what can and cannot be returned
High-pressure phone reps who discourage any and all returns
No stated return policy
During the holidays, customers have even less patience than usual. Who will sit around waiting for the mysterious return process to unfold when they can instantly put a chargeback in? Counter this problem by having an easily understood return policy and communicating it to customers before purchase.
Use Anti-Fraud Databases
Fraud is a different story. To fight off determined, professional criminals, common sense isn’t enough – you also need technology on your side. Anti-fraud databases are one tool worth investigating. By using services like ThreatMetrix, you can be automatically alerted to suspicious ordering activity, such as:
Whether the computer was ever used in a
Whether multiple rapid orders with different credit cards were attempted
Whether the computer is really located where the user claims to be
Essentially, you are putting each purchase through a scanning engine that analyzes the order for any known signs of suspicious activity. If a red flag goes up, you are notified and given suggestions on further investigative and corrective action.
Advertise Harsh Penalties For Fraud
Another way of deterring fraudulent chargebacks or purchases is by plainly stating the very harsh penalties you will impose. Some merchants assume that a determined criminal knows full well what the consequences are and would carry out his scheme no matter what. And in some instances, this is certainly true. Others, though, might have a change of heart after seeing “fraudulent charges will be prosecuted and reported to the authorities” emblazoned above the checkout counter.
Remember: legitimate customers will not be offended by this. On the contrary, they prefer to know that companies they do business with are working hard to keep con men away. Only those intending to rip you off will be scared, which is the entire point!
Require Signatures For Big-Ticket Purchases
The more data you can collect from a customer, the easier it will be to fight dishonest chargebacks. That’s why it pays to require a signature for big-ticket holiday purchases, such as:
Having a signature creates the possibility of matching it with past orders, running it through an anti-fraud database or sharing it with the authorities. Obviously, none of this can be done with a signature you didn’t collect. Simply explain to customers that a signature is required for their own good and to deter thieves – few, if any, will be inconvenienced enough to leave.
Require The 3 Digit “CVC” Code
Finally, never process online credit card orders without requiring the customer’s 3-digit CVC code. By requiring customers to type in a CVC code, you are adding an extra layer of security to the transaction, something you can point to in the event of a dispute. Unless you obtain this information, it is extremely easy for a customer to tell their credit card company that they never authorized the purchase – even if they did.
Also keep in mind that CVC codes are frequently missing from fraudulently obtained credit cards. Someone who used an automatic account number generator, for instance, would not have a matching CVC code. Therefore, simply by requiring one, you will prevent some percentage of fraud from ever entering your payment system.