Customer disputes are a truth of accepting payments. However, that doesn’t make them any less disappointing. Chargebacks are the consequence of a customer questioning or disputing a transaction with their issuing bank. The issuing bank gathers proof from the customer and categorizes the chargeback utilizing the suitable, card network-specific, reason code.
There are 151 chargeback reason codes over the four major card networks. The good news for those using iPayToTal payment services, the several reason codes and pails them into eight distinct categories. For those not using iPayToTal payment services, you’ll see similar categories of reason codes represented in their original reason code format.
By understanding the reason code related to the chargeback, you’re ready to present a response that includes the suitable convincing proof. In this post, we’ll survey the categories of reason codes merchants will see regularly, the particular reason codes related to the category, and what compelling evidence to incorporate to present a response.
For most merchants, fraudulent chargebacks symbolize to the greater part of customer disputes they see. Chargeback reason codes used to classify fraudulent chargebacks include American Express reason code 193, Visa reason code 83, MasterCard reason code 4863, and Discover reason code 6040.
Still, just because a chargeback is coded with fraud or no authorization reason code does not mean genuine fraud has really occurred. Checking the customer IP address, exploring AVS or CVV failures, and using iPayToTal’s Risk Analysis features, you efficiently shield yourself from the majority of this fraud.
Then for what reason do fraudulent chargebacks still occur? Since the disputed transaction wasn’t really fraudulent. Truth be told, genuine fraud accounts for only 29% of absolute fraud losses for e-commerce. The remaining 71% of losses originate from chargeback fraud and friendly fraud. Luckily, by submitting a response to chargebacks coded as fraud, you can win the chargeback and regain the transaction value.
How you respond to fraudulent chargebacks relies on the nature of your business and the conditions of the current transaction. If you acquired authorization from the cardholder and utilized AVS and CVV, you should supply at least the following in your response:
If the product was delivered to the cardholder’s address, include:
Beyond the minimum required convincing proof, you can (and should where suitable) also give proof as photos, emails, or generally, that proves and/or displays:
Merchants selling digital goods have more convincing proof to collect to respond to a chargeback categorized as fraudulent. The chargeback response needs to incorporate a description of the product downloaded, the date and time of download, and at least two of the following:
Unrecognized chargebacks are fundamentally the same as fraudulent chargebacks, in that the cardholder does not identify a transaction on their statement. In any case, for this situation, the cardholder does not at first trust that their account data has been compromised. Chargebacks that happen because of unrecognized transactions are described to by various reason codes. Including, but not constrained to MasterCard reason code 4837, Discover reason code UA38, and Visa reason code 72. Chargebacks that happen because of a cardholder’s inability to identify the merchant are nearly always the consequence of poor merchant descriptors.
If you use iPayTotal Services, you’re in luckiness, setting a decent merchant descriptor is simple. Payment service providers that aggregate and underwrite multiple services, for example, your gateway, processor and acquiring a bank account, as ipayTotal Payments will possess some space before you on the descriptor so be as brief as conceivable without being confusing or cryptic. iPayTotal cleverly just uses SP * holding everything except five characters for you.
With a clear merchant descriptor, you effectively prevent the majority part of unrecognized-related chargebacks. Yet, for those that do in any case happen, you should treat unauthorized chargeback responses as you do chargebacks categorized as fraudulent. Thus, if you get authorization from the cardholder and utilized AVS and CVV, you should supply the following:
Subscription billing can end up being wildly effective for merchants who execute recurring payments well. But even these merchants will see chargebacks associated with subscription billing disputes. Here, the customer updates you of recurring payment cancellation, yet they kept on being charged in the following billing cycle.
If you’re a subscription billing merchant, there could be subscription billing related chargebacks that aren’t categorized under iPayToTal’s ‘Subscription Canceled’ umbrella. For instance, customers probably won’t perceive your merchant descriptor on their monthly statement. These chargebacks would come through as ‘Unrecognized’. Or on the other hand, the customer’s credit card on record was expired or not yet valid when the recurring billing transaction happened. Chargebacks representing this situation would almost certainly appear as ‘General’.
The elements of a subscription billing chargeback response relies upon the exceptional conditions of the current transaction. At times, a customer may have reached you to cancel the membership, however because of the terms in your subscription cancellation policy the cancellation would not go effect until after the following billing cycle. This circumstance is represented by Visa reason code 41, MasterCard reason code 4841, American Express reason code 4544, or Discover reason code 4541. If the customer disputes this transaction, you have to give:
Interestingly, the circumstance could rather be one where the customer did not get in touch with you to drop their membership. For this situation, you have to supply documentation to prove that the membership was not dropped and that you or your acquiring bank were not updated that the subscription billing was canceled. This documentation generally incorporates one of the following as convincing proof to disprove the chargeback:
With product not received chargebacks, the customer did not get the product they bought. Shipping is arguably the greatest test in e-commerce. Merchants that don’t have a strong delivery and fulfillment policy can hope to see this chargeback category very often.
Each card network has explicit reason codes to represent to customer disputes where the cardholder claims they never products or services: American Express reason code 155, Visa reason code 30, MasterCard reason code 4855, and Discover reason code 4755.
Winning these chargeback requires proof that demonstrates the customer received the product, service, or digital goods before the date they disputed the transaction. But the proof you give all relies upon what sort of product you gave to the customer.
‘Product Unacceptable’ chargebacks implies that the customer feels the product they got either arrived damaged, was defective or was not as depicted by the merchant at the time of the transaction. A customer can also deem stock unacceptable if they believe it to be of low quality, fake, or if the terms of the offer were misrepresented. These assortments of disputes can be depicted by American Express reason code C31, Visa reason code 53, MasterCard reason code 4853, or Discover reason code 4553, among others.
For honest merchants, this classification of chargebacks is typically the outcome of poor product descriptions or strict return policies. Your item portrayals ought to be powerful and incorporate every single relevant specification. Furthermore, above all, the product descriptions ought to precisely portray the product sold.
These chargebacks can also happen from customers who attempted to make a legitimate return with you, which was denied because of your return policy. They along these lines dispute the buy guaranteeing the product to be unacceptable. Strict return policies normally accomplish more damage than anything else, especially with regards to chargebacks. While a customer-driven return policy can preserve long-lasting customer relationships.
In most cases of product issue-related chargebacks where the customer asserts the product was not as defined, the following compelling proof will make the best defense to prove the dispute to be invalid:
In addition to the convincing proof above, extra documentation should be provided based on the method of delivery:
• If the physical stock was dispatched, include:
• Tracking number
• Complete shipping address data
• Date of shipment prior to the dispute date
• Shipping transporter
• Proof the address delivered to match the address provided by the customer
• If digital merchandise was provided, include:
• Proof that the customer got to the purchased digital goods, including:
• IP address
• Server or activity logs
• If a transaction happened digitally where an offline service was provided, include:
• Date of services
• Documentation demonstrating the services were given to the customer on the predetermined dates
With the expense related to chargebacks, organizations should find a way to secure themselves. Here are some simple steps that can help avoid chargebacks:
Respond to retrieval demands and chargebacks quickly. Banks will just process a chargeback if you don’t respond to the dispute in the apportioned time.
Make it as simple as possible for customers to get customer service, and make the return policy clear at the time of the transaction. Numerous customers will go to a business to resolve a dispute first, possibly starting the chargeback procedure if they can’t get help or a refund. An immediate refund to a customer is in every case less expensive than if a customer wins a chargeback.
Card-present businesses can avoid chargebacks by requiring that cards be swiped, and get a signature whenever possible. This makes it less demanding to demonstrate that the cardholder is the one utilizing the card — so easy that, start in April, Visa will dismiss chargebacks with certain fraud reason codes if the card was electronically read.
Consider utilizing the Address Verification Service against fraud tool. AVS works by looking at a customer’s name, address, and zip code with the data on record at the credit card organization. Mismatches can show that transactions ought to be declined or that you ought to continue with alert and require additional information. Matches indicate a more prominent probability of a valid transaction.
Another recommendation to avert fraud is to expect customers to enter the 3 digit security code on the back of their card when ordering items online. This guarantees the person utilizing the card has the physical card close by and has not stolen an account number.
One more advance to avoid fraudulent online purchases is to take advantage of Verified by Visa or MasterCard Secure Code — both programs that expect customers to enter a password when utilizing a card online.
Speak with customers. If customers know the status of their requests, they will be less inclined to dispute a charge.
Publicize genuinely and have clear terms of service — these can prevent customers from disputing transactions because the product they bought was not as defined.
Take measures to stay away from clerical or technical errors.
Pursue the terms of service set by the card brands. Any compliance violation can make a merchant lose its chargeback rights.
If you want to know more about chargebacks and ways to prevent them, contact us right now. You can call us at +44 800 776 5988 or even mail us at [email protected]