All I Want for Christmas Is No Chargebacks

While the next few weeks are the bonanza of ecommerce sales, the months after can be a wake up call merchants do not want to hear.

This time of year, it is easy for merchants to get excited over increasing sales numbers. Most merchants depend on holiday season ecommerce to meet their yearly numbers and remain profitable. But those glaring dollar (and euro) signs can blind merchants from the onslaught of chargebacks and disputes to come in the not-so-distant future. Some easy preventative measures can help merchants reduce holiday season ecommerce chargebacks, keep their customers happy, and most importantly – keep those profits in their own pockets.

According to risk-management provider Verifi, “chargeback volumes [among its clients] can increase by as much as 50 percent during the holiday-shopping season.” Whether you work with a third party risk mitigation company, or handle everything in-house, chargebacks are the payment elephant in the room everyone wants to ignore, but shouldn’t.

Fraud Chargebacks vs. Customer Chargebacks

For simplicity, breaking down chargebacks into two separate categories can help identify opportunities in your company for prevention: fraud chargebacks and customer chargebacks.

Fraud chargebacks are when you, the merchant, are maliciously attacked by a fraudster. They are looking to steal your products using everything from stolen credit card data to misappropriated valid consumer information. And with the number of data breaches reported this year (and unreported), it has become harder to identify valid vs. non-valid purchases.

These type of chargebacks can be the most harmful to your bottom line if there is a hole that fraudsters can exploit. Do you track velocity? Do you use an address verification system (AVS)? Does your current payment processor validate orders at the point of sale? After the sale? Does your website have the most up-to-date encryption on the purchase page? Do you have a dedicated fraud prevention specialist for verifying sales that “don’t make sense?” Answering these questions can help prevent some fraudulent sales – specifically the fraudsters who are less elegant in their attack schemes.

Customer (non-fraud) chargebacks occur when customers place a valid order, but dispute the charge anyway. These type of chargebacks can harm your bottom line and your brand as a whole. And if a merchant loses positive brand recognition starting Black Friday sales in mid-July won’t help them remain profitable.

According to risk-management provider Verifi, “chargeback volumes [among its clients] can increase by as much as 50 percent during the holiday-shopping season.”

Some of the most common types of customer chargebacks are:

  • Services not rendered/not as described
  • Non-receipt of merchandise
  • Credit not processed
  • Cardholder does not recognize

All of these can be prevented with some simple planning on the merchant’s end.

  1. Make sure you send what you are advertising/selling. This may seem simple, but merchants may think they can make a last minute change if they are out of a certain product. Or even something like your webpage not being fully optimized and showing a certain shade of yellow that is not the same as the shirt you send your customer.
  2. Make sure you send products to where the customer asks. Additionally, make sure you are sending to valid addresses, matching shipping and billing addresses, valid AVS, and proof of delivery if the product is expensive. Visa and MasterCard have started making adjustments to evidence submitted in chargeback cases, but nothing will help you if you send a product to a wrong address, or if AVS is not a match and you send it out anyway.
  3. If a customer wants a credit, and you have the product still, credit the transaction back. Do not haggle. Do not keep some money for your “inconvenience.” Do not give a store credit (unless customer EXPLICITLY agrees). You will lose these chargebacks every time. If the customer still has the product and agrees to send it back, credit the customer after you receive it. If the customer does not agree to send it back, then work with your processor and see what they suggest in this situation.
  4. For cardholder doesn’t recognize, is your messaging clear to the customer? Do they know what is going to appear on their credit card statement? Are you a subsidiary, and the parent company appears? Simple steps like adjusting a credit card descriptor helps a lot.

The beauty of these preventative measures is that most cost almost nothing.  You can handle them on your own if you have the resources.

Verifying AVS, velocity checks and delivery verification should be something you already have in place. Most DIY payment gateways have these as basic fraud options and requesting proof of delivery should be part of your delivery method anyway.

If your gateway does not have adequate preventative measures, check with your credit card processor and ask if they have credit card investigators/fraud investigators screening your transactions. They might not catch the transaction until after you authorize it, but with their help you can run a refund, lose a fraudulent sale and keep your merchandise.

If a chargeback does come in, work with your payment processor. Remember that they weren’t the ones who ran the transaction, and they aren’t the ones who initiated the dispute. But they do want to work with you to get your merchandise or money back.

If you don’t have any preventative measures in place stop reading this article and go fix that. Right now. The upfront costs do not compare to the dangers of losing your money, your merchandise, your brand reputation, and your ability to take credit cards – all due to chargebacks from the most wonderful time of the year.


Chargebacks are a part of doing business, but they don’t have to put you out of business. Preventative steps can be taken to mitigate the costs, and optimize your profit during the busiest time of the year.

Tim Russo is the Fraud Prevention Team Leader at cleverbridge

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