Chargeback Alert Processing Solutions
Chargebacks cut into the bottom line of millions of businesses in North America every year, negatively affecting their sales, and perhaps more importantly, their reputations. Chargebacks are often processed without involving the merchant, leaving them defenseless against fraud and risking their reputations with payment processors and credit card companies. PayDiverse’s chargeback alert system provides high-risk merchants with real-time chargeback alerts, giving them the opportunity to dispute the chargeback, save money and keep their reputations intact.
High-risk merchants in need of chargeback protection can benefit enormously from PayDiverse’s chargeback alert system. To receive real-time alerts and round the clock protection from excessive chargebacks, click here to fill out and submit your merchant account application.
What is a chargeback?
A chargeback begins when a consumer files a dispute against a specific charge with their credit card company. Consumers may file a dispute for any number of reasons, including unauthorized transactions, shipped purchases arriving late, damaged or not arriving at all, and unfortunately, consumer fraud. Once the dispute is filed, credit card companies such as Visa, MasterCard or American Express, will notify the payment processor who will usually process a chargeback, refunding the money onto the consumer’s credit card. Chargebacks are paid for collectively by the merchant, payment processor, and the processor’s sponsor bank. Many times the chargeback will be processed without the merchant’s knowledge.
In the early days of credit, chargebacks were designed to protect consumers from fraud, scams and credit card theft. If a merchant were to misuse the consumer’s credit card information or not provide the service or item that was paid for, or if a credit card was stolen, a consumer would be able to file a dispute with their bank or credit card provider and initiate a chargeback. Unfortunately, however, year after year we are seeing an increase in consumers who are taking advantage of this system and filing disputes fraudulently.
How do chargebacks affect merchants?
When chargebacks are processed, merchants take the biggest hit. Not does the merchant take the loss on the sale, they also risk their reputation with their payment processor. Merchants are required to keep their chargeback ratio below 2.0% to avoid fines and large fees, meaning that for every 100 credit card transactions they process, a maximum of 2 can result in chargebacks. If a high-risk merchant’s chargeback ratio exceeds 3.0%, they will have their merchant account closed, leaving them unable to accept credit cards or debit cards as payment methods from their consumers.
Having a merchant account closed due to excessive chargebacks can negatively affect a merchant’s chances of opening accounts with alternative payment processors, and can also negatively affect the merchant’s approval if applying for credit.
Chargeback reason codes
When a chargeback is initiated, the credit card company requesting the chargeback must provide one of four reason codes.
- Technical – these include transactions processed on expired credit cards, insufficient funds transactions, and other bank processing errors.
- Quality – these apply to purchases in which a consumer received an item damaged or defective, or their item was shipped and received late or not at all.
- Clerical – clerical chargebacks are processed when employee error is at fault – this includes a refund that is promised but never received, duplicate transactions and charges processed for the wrong amount.
- Fraud – this code is used in the event of identity theft, or stolen credit cards.
Most commonly, chargebacks are a result of fraud, whether it be fraud due to a stolen card, or what is referred to as friendly fraud, which is when a consumer claims they received damaged goods or did not receive their purchase at all, when in fact, they received them with no issues at all and are just hoping to get away without paying.
How can merchants combat chargebacks and consumer disputes?
Aside from subscribing to PayDiverse’s chargeback alerts, documentation can be the best defense against consumer disputes and chargebacks. When disputing a chargeback, providing evidence that the consumer was aware of the transaction can make or break the case. Some ways that merchants can ensure they have the evidence to dispute chargebacks include:
- Retaining paper receipts for all credit card transactions
- Provide customers with an electronic copy of their receipts via e-mail – merchants should include as much information in these receipts as possible, including the merchant’s contact information
- Training employees to properly process in-person credit card transactions by checking consumer ID when accepting credit cards and making sure the number on the card matches the number on the computer/receipt
- Merchants can ensure that they have a fair policy in place for refunds and exchanges to instill confidence and trust in their customers
- Providing consumers with reliable customer service and promptly and efficiently processing requests for refunds and exchanges
Often consumers may forget transactions and purchases, which is why providing them with receipts of their transactions is so important. Providing consumers with a fair return and exchange policy and reliable and efficient customer service increases the chances that they will return to the store or call the customer support line before filing a dispute with their credit card provider. Setting up a 24/7 customer support line that is well-staffed to avoid long hold times, or a simple online chat support feature on the merchant website will make it more convenient for customers to obtain refunds when necessary and will highly decrease instances of consumer disputes and chargebacks.
What types of merchants are at the highest risk for chargebacks?
When it comes to chargebacks, not all merchants are equal. Some businesses are at a higher risk for excessive chargebacks due to the nature of what they sell. High-risk merchants include those who sell the following products:
- Adult entertainment
- Automotive parts
- Cigarettes/cigars/e-cigarettes/vaping accessories
- Coins and precious metals/gems
- Debt consolidation and credit repair
- Health and Beauty products
- Magazine subscriptions
- Membership clubs
- Mobile apps and online games
- Moving services
- Multi-level marketing
- Online Dating
- Penny auctions
- Sports betting
- Subscription billing merchants
- Technical support
- Tickets (airline, concert, etc)
- Travel-related services
- Web design
Other reasons a merchant may be considered high-risk include:
- Poor credit history
- Minimal credit card processing history, this may be the case with newer businesses
- Having a previous merchant account terminated by the payment processor
- Dealing in multiple currencies or operating in multiple countries outside North America
- Having a high chargeback ratio
How can PayDiverse chargeback alerts help high-risk merchants?
PayDiverse assists high-risk merchants to lower their chargeback ratio with real-time chargeback alerts. Merchants are notified immediately when a chargeback is initiated on their merchant account, allowing the merchant to file a dispute against the chargeback before it’s too late.
PayDiverse offers superior support to merchants, helping them to fight unnecessary chargebacks on their accounts and preserving their chargeback ratios, allowing them to save their reputation and continue processing credit card and debit card payments.
PayDiverse supplies merchants with necessary tools and resources to fight chargebacks and prevent consumer disputes. We have the technology and information merchants need to identify flaws in their policies to reduce instances of unjustified disputes and chargebacks and provide them with the right information and support to help them fight chargebacks that do occur.
PayDiverse’s access to confirmed fraud data, along with our award-winning fraud protection tools, detects fraud in real-time by using a number of methods to analyze hundreds of order data points. These tools were designed with high-risk merchants in mind, and when used in combination with our chargeback alert system, they provide merchants with unparalleled defense against fraud and unnecessary chargebacks.
What does a PayDiverse high-risk merchant account include?
PayDiverse offers high-risk merchant support that is the best in the industry. We work with a large network of banks both in the US and offshore and offer high-risk merchants secure, multi-bank transaction distribution, decreasing the risk of exposure account termination. The chargeback protection we provide allows high-risk merchants to preserve their bottom line, their credit, and their reputation with payment processors.
- Pre-chargeback alerts in real time
- Chargeback dispute system
- ISpy fraud prevention software
- Reliable and secure payments
- Automatic multi-bank transaction distribution
- Customized processing strategy
- Daily account monitoring and management
- Descriptor testing
- Customer service testing
- 24/7 customer support
How to get started with PayDiverse
Opening a merchant account with PayDiverse is simple and the benefits are endless. We have more than 15 years of experience in processing payments for high-risk merchants and we have tested and worked with over 40 banks both in North America and offshore. We will only submit your application to banks that are the best fit for your business, and this allows us to approve 98% of applications.
- Approval within 24 hours
- Account set up within 48 hours
- Secure processing
- Unique solutions – if US banks won’t approve you, we will work with offshore banks to get your application approved.
The application process is easy. Simply fill out our web form, add your digital signature to your applications and submit supporting documents. If your account is approved, you will be ready to begin processing payments in 48 hours.
Apply online today, and begin fighting chargebacks and taking advantage of all that PayDiverse can offer!
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