The credit card fraud sharks are circling, ready to take a nasty bite out of your hard earned profits in the form of fraudulent chargebacks. Chargebacks (disputed credit card charges), which were originally designed to protect consumers from unauthorized credit card charges, have become a bigger issue in recent years.
According to Juniper Research, a world-wide forecasting and consulting company for digital markets, in 2017 alone, retailers lost over 31 billion in chargebacks. The problem is not going to go away, in fact, it is expected to get worse.
A lot worse.
Per a study by LexisNexis, a risk management company, the cost of chargebacks increased by 14% between 2017 and 2018, with the average retailer losing as much as 1.8% of their revalue to fraud-related costs. When you consider that most retailers work on a razor-thin profit margin of 5% or less, that loss is even more significant. While chargebacks are an area of concern, there are some things you can do about it.
GET THE LOW HANGING FRUIT FIRST
While credit card fraud is the biggest reason for chargebacks, a certain percentage are due to preventable clerical errors. This can be as simple as teaching your team to follow certain protocols, such as creating a clear descriptor to make identifying the charge easier. If, for instance, you list a name that is different from your store’s brand name, such as a parent company name, the customer may not recognize the charge.
Another way to reduce chargebacks and improve customer retention is to practice post-purchase engagement. Simply by following up with customers to see how they like and are using your product, can dramatically improve the customer experience and increase the chances of future purchases. It does not have to be time consuming either. A simple call, text, or brief email will often do.
CREATE A CLEAR REFUND AND RETURN POLICY
Returns are a part of retail life. According to CNBC, a business and finance news outlet, Americans return as much as 8% of all purchased merchandise. This creates a burden to retailers who have to deal with returns and restocking. Many retailers try to reduce this number by creating stricter return policies, which can also lead to unhappy customers denying they made a purchase in order to get their money back.
A clearly articulate return policy that is also reasonable and sometimes flexible, can not only reduce the number of chargebacks, but create more satisfied customers. When possible, consider having an in-store return policy.
The reason is twofold: first, according to a survey by UT Dallas, 63% of online shoppers check the return policy before making a buying decision. Another 48% stated they are willing to shop more often if the return policy is flexible and easy to understand.
Secondly, if a customer is returning an item in-store, they are much more likely to make an additional purchase which can help offset the costs of returning an item to active inventory.
MAKE IT TRACKABLE: KEEPING GOOD RECORDS
Keeping good records including the dates, amounts, authorization information and other documentation helps too. Creating a paper trail may seem like a bother, but it can be the difference in winning a dispute when the customer simply forgot they made the purchase.
You should also create and implement card present and card not present purchases. Teach them to be on the lookout for fraud by verifying signatures and getting customers to sign on sales orders and contracts when appropriate.
WATCH FOR SIGNS OF FRAUD
Spotting fraud is not always easy, especially when the purchase is done online. Train your team to be on the lookout for details such as shipping and billing addresses that do not match, and incorrect security codes. You may also want to think about adding an address verification system to reduce fraud.
Many retailers purchase chargeback insurance, which can help to cover the cost of chargebacks associated with stolen cards, post-purchase shipping address changes, and mismatched signatures.
If you do receive a chargeback, you need to respond promptly. Additionally, consider offering a toll free number where you can be reached on billing statements so that customers can call you directly rather than contacting their bank to initiate a chargeback.
Finally, consider protecting yourself from chargebacks with digitized signature records, integrated webcam monitoring and/or more secure online shopping cart and payment functions such as those provided by the Nova Point-of-Sale system.
At Nova, we understand that you need a system that is robust, easy to use and integrated. That’s why we offer advanced point-of-sale retail solutions that focus on your unique retail needs.
From branding to email campaigns, scrupulous record keeping, and exceptional support, we are here to help you get where you need to be. Click here for more information, or call 1-888-370-6682 today.