Chargeback: what is it and how to avoid it in your business?
Posted: Sun Dec 22, 2024 7:19 am
Did you know that every transaction carried out in e-commerce, especially with a credit card, has the potential to result in a chargeback, that is, the return of the amount paid?
According to the FraudLabs platform , this happens because the online merchant uses a payment gateway to process credit card transactions in their store.
Although it represents a convenience for the customer, for the merchant it represents a greater exposure to risk, as you will see in this content.
Summary
What is a chargeback?
But what does chargeback mean?
How does chargeback work?
How to prevent chargebacks?
Can a chargeback harm a merchant's reputation?
How to combat digital fraud that leads to chargebacks?
From theory to action in combating chargebacks
What is a chargeback?
Before we move forward, it is important to understand what a chargeback is. It is the return of an amount paid for a purchase made with a credit or debit card.
A word of English origin, it is nothing more than the cancellation of a sale at the request of the cardholder made directly to the credit or debit card administrator. The amount is refunded to the customer.
Chargeback was created by card operators to protect customers from false payments and purchases in digital media and physical retail.
But what does chargeback mean?
As we have seen, chargeback is the process of returning the value of a purchase made with a card. It is very common to confuse them with refund and reimbursement. Let's look at the differences:
Refund: This also involves the credit card company, which requests the cancellation of the transaction from the store. This request is made whenever there is a problem with the product or service provided. It could be a duplicate charge, a mistaken purchase or a late delivery. The refund is made through the store's payment platform.
Refund: is the return, made by the store, of the amount spent by the customer on a purchase that was canceled due to a problem with the product or service.
In the case of chargeback, the request to cancel the taiwan phone numbers purchase is made by the customer directly to the card operator, which follows the internal procedures for returning the unrecognized purchase.
How does chargeback work?
Chargebacks can occur for a variety of reasons. They can be the result of the payment gateway, as we saw at the beginning of this text. In these cases, since the transaction is made in a card-not-present (CNP) environment, the merchant is more vulnerable to dishonest customers or fraudsters using stolen/cloned cards.
So why does card-not-present pose a greater risk? Because only the data (card number, expiration date, name and verification code) are required for an online purchase. This process eliminates the need to use a chip and have the card in your possession, which are two methods that are more difficult to circumvent when paying in a physical store.
Therefore, the most common causes are: fraud, problems with the purchase and/or the retailer, and processing errors.
Fraudsters often use cloned, lost or stolen cards to make purchases. This is when the cardholder requests a chargeback when they see an amount charged on their statement that they do not recognize.
According to the FraudLabs platform , this happens because the online merchant uses a payment gateway to process credit card transactions in their store.
Although it represents a convenience for the customer, for the merchant it represents a greater exposure to risk, as you will see in this content.
Summary
What is a chargeback?
But what does chargeback mean?
How does chargeback work?
How to prevent chargebacks?
Can a chargeback harm a merchant's reputation?
How to combat digital fraud that leads to chargebacks?
From theory to action in combating chargebacks
What is a chargeback?
Before we move forward, it is important to understand what a chargeback is. It is the return of an amount paid for a purchase made with a credit or debit card.
A word of English origin, it is nothing more than the cancellation of a sale at the request of the cardholder made directly to the credit or debit card administrator. The amount is refunded to the customer.
Chargeback was created by card operators to protect customers from false payments and purchases in digital media and physical retail.
But what does chargeback mean?
As we have seen, chargeback is the process of returning the value of a purchase made with a card. It is very common to confuse them with refund and reimbursement. Let's look at the differences:
Refund: This also involves the credit card company, which requests the cancellation of the transaction from the store. This request is made whenever there is a problem with the product or service provided. It could be a duplicate charge, a mistaken purchase or a late delivery. The refund is made through the store's payment platform.
Refund: is the return, made by the store, of the amount spent by the customer on a purchase that was canceled due to a problem with the product or service.
In the case of chargeback, the request to cancel the taiwan phone numbers purchase is made by the customer directly to the card operator, which follows the internal procedures for returning the unrecognized purchase.
How does chargeback work?
Chargebacks can occur for a variety of reasons. They can be the result of the payment gateway, as we saw at the beginning of this text. In these cases, since the transaction is made in a card-not-present (CNP) environment, the merchant is more vulnerable to dishonest customers or fraudsters using stolen/cloned cards.
So why does card-not-present pose a greater risk? Because only the data (card number, expiration date, name and verification code) are required for an online purchase. This process eliminates the need to use a chip and have the card in your possession, which are two methods that are more difficult to circumvent when paying in a physical store.
Therefore, the most common causes are: fraud, problems with the purchase and/or the retailer, and processing errors.
Fraudsters often use cloned, lost or stolen cards to make purchases. This is when the cardholder requests a chargeback when they see an amount charged on their statement that they do not recognize.