The direct financial hit from chargebacks is undeniable. Not only does the business have to pay back the transaction amount, but they might also incur hefty penalty fees. This double jeopardy of losing both revenue and paying a penalty can cripple establishments operating on thin margins, like many in the hospitality sector.
Furthermore, frequent chargebacks tarnish a business’s reputation with credit card processors, which can affect their credit score. Over time, this can lead to higher processing fees or even a frozen merchant account.
Given the detrimental impacts of chargebacks, it’s paramount for hoteliers and restaurateurs to proactively minimize them. In this article, we offer effective strategies to reduce potential merchant errors, counteract friendly fraud, and combat criminal fraud effectively.
If you haven’t read our previous article, Decoding Chargebacks: Insights for the Hospitality Industry, we suggest you to give it a thorough read for a deeper understanding.
Addressing Merchant Errors
In the realm of business transactions, especially within the e-commerce and hospitality sectors, merchant errors play a significant role in customer dissatisfaction and subsequent chargebacks. These errors, often unintentional, refer to oversights or misrepresentations by merchants that can lead to misunderstandings or unmet expectations from customers.
From inaccurate room descriptions in the case of hotels to ambiguous policies, these mistakes can be costly, both in terms of financial repercussions and damage to a business’s reputation. Addressing and rectifying these errors proactively is paramount for businesses to foster trust and maintain a healthy relationship with their clientele:
- Ensure all product and service descriptions are accurate and provide clear visuals, especially for online orders or bookings.
- Clearly state return or refund policies, and ensure the customer understands them.
- Make your contact details conspicuous on receipts, websites and confirmations so clients can address concerns directly rather than resorting to chargebacks.
- Never accept expired cards.
- Educate employees on the importance of clear communication and customer service to prevent misunderstandings and disputes.
Countering Friendly Fraud
Chargeback fraud, sometimes called “friendly fraud”, occurs when a cardholder disputes a legitimate charge made to their credit or debit card. Despite the name “friendly,” it’s a deceptive practice. Essentially, after receiving a product or service, the cardholder falsely claims to their bank or credit card company that they didn’t authorize the charge or didn’t receive the promised goods or services. As a result, the merchant faces a chargeback, even though the transaction was valid and the customer did receive the product or service.
Common reasons for friendly fraud include buyer’s remorse, financial difficulties, or a misunderstanding about refund policies. It’s challenging for businesses to defend against this type of fraud since, on the surface, it appears to be a legitimate customer dispute. To reduce these types of situation:
- Send confirmation emails or messages detailing the purchase, price, and any recurring charges if applicable.
- Offer multiple, easy-to-use channels for customers to get in touch with concerns or issues and respond promptly to inquiries.
- Maintain a clear record of order forms and a communication log between the merchant and the customer. This documentation can be vital in disputing unjust chargebacks.
- Utilize tracking numbers for any shipped goods or vouchers to validate delivery and receipt.
Combatting Criminal Fraud
Especially prevalent in online transactions, criminal fraud can manifest in various forms, from stolen card information to counterfeit transactions. For businesses, the fallout from criminal fraud can be substantial, encompassing financial losses, damaged reputation, and compromised customer trust. To mitigate the risks of criminal fraud:
- Use Address Verification Services (AVS) to compare the billing address provided by the customer with the address on file with the credit card company. Discrepancies may indicate potential fraud.
- Always request the CVV code during card-not-present transactions.
- Monitor for suspicious activity, such as multiple high-value transactions in a short period, frequent transactions from the same IP address, or purchases made at odd hours.
- Regularly train employees, especially those handling payments, to recognize signs of fraud and to follow security protocols.
Point-Of-Sale (POS) Systems: A Line of Defense
A robust POS system plays a pivotal role in the fight against chargebacks. These systems, particularly modern digital ones such as Veloce POS, can store transaction details and provide proof of transactions. In cases where customers dispute charges, the data logged by the POS can be the evidence that tilts the case in the merchant’s favour.
Discover Veloce POS
Navigating the intricate world of chargebacks can be daunting. But with the right tools, you can turn challenges into opportunities. Our advanced features not only streamline your transactions but also arm you with preventive measures against chargebacks. Why wait? Book a free demo today and witness firsthand how Veloce POS can transform your business operations and safeguard your revenues.
