COVID-19 has changed the way our entire world operates. Unfortunately, that means merchants, banks and consumers have been forced to adapt to new procedures and policies in payment processing. With these changes in the payment processing landscape come many challenges, including a spike in consumer chargebacks. This is particularly true for merchants in the hardest-hit industries, such as travel, entertainment and hospitality.
Both Visa and Mastercard have released updates to ensure that all parties involved are treated fairly throughout this process. Below, we’ll discuss the increased risk of chargebacks during the pandemic and what changes have been brought about to mitigate that risk and ensure fair treatment for consumers, as well as what merchants can do to mitigate chargebacks during this time.
Why Does COVID-19 Increase the Risk of Chargebacks?
Since the beginning of COVID-19 pandemic, merchants have been struggling with cancellations, supply shortages and staff shortages. Those in the travel and hospitality industries in particular have been overwhelmed with calls from customers who’ve had flights and travel plans canceled due to flight restrictions and many have been unable to field inquiries in a timely manner. This has led to many customers going directly to their credit card issuer to file chargeback requests.
When it comes to retailers, supply shortages on everything from cleaning supplies to prescription medications to hair care products has left merchants scrambling. Many find themselves unable to fill orders on time or even at all. Additionally, many are left short of staff in their warehouses and shipping departments due to social distancing guidelines and quarantine requirements, which has led to even more shipping delays resulting in chargeback requests.
Changes to Visa and Mastercard Guidelines
While the guidelines aren’t identical with Visa and Mastercard, they are strikingly similar when it comes to changes to chargeback rules. Since the onset of COVID-19, customers are unable to file chargeback requests in the following situations:
- If a service is available but the cardholder has willingly declined it (i.e. beauty services, wellness services, consultative services)
- Travel restrictions have caused the cardholder to be unable to honor a scheduled service appointment
- No-show charges have been applied to the card if a cardholder did not cancel a scheduled appointment
- A cardholder misses a non-refundable service due to missed flights
- A cardholder has accepted a raincheck for future services or a gift card and then changes their mind but are denied a refund by the merchant.
Of course, there are still instances when a chargeback may be necessary for a consumer to file. They continue to be allowed to file chargebacks in the event that the vendor has not provided prompt refunds for services or goods that have been cancelled or the terms of a contract have not been adequately met.
Tips for Merchants
As a merchant, there are many things that can be done to mitigate chargebacks. First and foremost, it’s important to maintain an open line of communication with your customers. During the pandemic, this can be a bigger challenge due to higher volumes of calls to your customer service line and increased instances of service and supply issues. Here are a few tips merchants can follow to help manage customer complaints during this difficult time:
- Consider providing customers with additional contact options – if you typically require them to phone for service, install a chat bot on your website or provide an email address.
- Provide your customers with callback options so they don’t need to sit on hold when they phone in.
- If you’re experiencing a high call volume due to product or service cancellations or shipping delays, release a statement on your website or via email to explain the situation to your customers and let them know what to expect when it comes to refunds.
- If you know there will be delays in shipping, provide a note for your customers at checkout so they know what to expect before they purchase.
While chargebacks are frustrating for all merchants, most can be avoided. In addition to following the tips above, working with a payment processor provider such as PayDiverse that provides real-time chargeback alerts can help merchants reduce the risk of high chargeback ratios. To get started with PayDiverse payment processing, apply online today.
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