Protect Your Business From Friendly Fraud

Protect Your Business From Friendly Fraud

As a business owner, every profit counts, but the last thing you want to worry about is chargebacks. Chargebacks take place when a customer disputes a charge on their credit card bill. This can take place due to errors on the clerical side, upset customers, unrecognized purchases, and fraud. Chargeback fraud, or “friendly fraud,” is the act of consumers purchasing a good or service and then requesting a chargeback from their bank after receiving the product or service.

However, anytime a customer disputes a purchase, it places the business in a difficult position of pleading their case to prove the purchase of a product or service was legitimate. Once this process begins, even if the claim is proven legitimate, businesses are forced to pay retrieval, chargeback, and arbitration fees, which can be upwards of $400 in each case. Furthermore, the process of proving legitimate exchanges takes an unnecessary amount of time, time that most business owners do not have.

How can businesses reduce chargebacks?

It may not be possible to fully eliminate chargebacks, but employing these practices will reduce the number of chargebacks that your business faces.

Maintain Good Customer Service

If a customer is upset about the customer service of a business (or lack thereof), this can also lead to a chargeback. To resolve this, businesses should have the proper channels of communication available in order to address their customers’ concerns and frustrations.

Send Shipping Notifications

Customers like to know when their product has shipped and when they can expect to receive it. Sending the product’s shipment tracking number keeps the customer informed regarding the status of their order, but it also serves as a form of proof that the product was delivered.

Using a Familiar Business Name

Customers that receive a charge on their account for a business name that they do not recognize have a higher likelihood of filing a dispute. For this reason, businesses are recommended to use a credit card billing descriptor that’s similar to the business name, so that there are fewer misunderstandings. Businesses can also notify their customers regarding the name under which the charge will appear on their accounts.

Incorporating ACH Transfer as a Payment Option

The rate of chargebacks is high with credit card processing since it is very simple for consumers to dispute a charge on their card. ACH (Automated Clearing House) transfers are an alternative method for accepting payments from your customers and patients. Funds travel through an ACH network that is often faster and cheaper than standard credit card processing. The primary benefit of switching to ACH payments is that the dispute process is harder and more stringent, which leads to fewer chargebacks that your business needs to spend effort and energy to resolve. Choosing an ACH payment processor can be difficult, and the paperwork is overwhelming. Business owners are able to solve this issue, however, using the Denefits platform.

With Denefits no-fee payment processing, business owners can process one-time or recurring payments for their customers using ACH transfer. Another benefit of using ACH transfer is that by avoiding credit card processing, your business can also avoid those pesky credit card processing fees. Using Denefits makes ACH payments simple without any complications.

Chargebacks can be reduced, but not fully eliminated

As a business owner using ACH transfer, there are still a couple of things to keep in mind. While disputes with ACH payments occur far less often than credit card payments, ACH payments can still be disputed. The primary reasons are if the customer didn’t authorize the transaction (or if the authorization was removed) if the amount charged was not the amount authorized and if the customer was charged prior to the agreed-upon payment date. Since customers can win in a payment dispute, it is recommended that businesses do not give the product or perform the service until the ACH payment is cleared, in order to reduce the loss of a product or service.

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