Chargeback Prevention through Good Customer Service

Preventing Chargebacks

Chargebacks are the bane of merchant's existence. Not only do they cause obvious financial losses, they also trigger logical and administrative headaches for merchants. Fortunately, they are often preventable by providing good customer service. A simple search for "chargeback" on twitter show a long list of unsatisfied customers ranting about the lackluster customer service they received. For example:

@xxxxxYour customer service is a joke! Some "do" company.. Will be issuing a chargeback on my cc for this horrible service. Mac herewecome

or

@xxxxx How do I get a hold of someone in support management? Will be doing a chargeback against you due to support issues.

These are but a few examples of customers looking for customer service, only to have the merchants fail their (realistic or not) expectations. Regardless how they show their dissatisfactions, ultimately the most inexpensive way for merchants to resolve these issues before they escalate into chargebacks.

Here are 5 suggestions we have from our personal and professional experiences.

1. Tell them who you are

One of the most prevalent reasons that customers initiate a chargeback is that, without mal intent, they simply do not know who you are, as you appear on their credit card statement. So contact your credit card processor to make sure your name appear as the customer would know you on the statement. If you use a "doing business as" (d/b/a) name, then make sure that's what appears on the customers' statements. 37 Signal was able to reduce 30% of their chargebacks by changing just what appears on the statement and adding a phone number for the customer to contact them.

2. Have enough people for support

No one likes to wait, wither it's a physical line or an invisible queue on the phone. Staff your customer support appropriately based on your needs. Phones should be manned, emails returned promptly.

3. Give refunds

By the time a customer calls you up to ask for a refund, whether it's your mistake or his, he is looking to get out of the situation. It's an opportunity for you to pacify the customer and potentially win over a critique by wowing him with your customer service. Think of the alternative, if you don't offer a refund, the next phone call the customer makes might be to initiate a chargeback. Even if you fight the chargeback and win the representment, you often will spend much more time and money, which could be easily avoidable in the first place.

4. No bait and switch

Advertisements can be misleading. When the customer feels that he is not getting what he paid for, he is going to complain. Sometimes they complain to you, sometimes they skip you and go directly to their credit card companies. Be as open as possible to criticisms from customers and steer your business practices accordingly.

5. Keep the customer informed

Whether you offer physical products or digital goods, make sure you continue to engage your customer and provide transparency. Let them know when their orders have been processed or have left your fulfillment center and en route to them.

5 Things We Learned About EMV.

How EMV is going to affect you.

EMV stands for Europay Mastercard Visa. It is a technology developed over many years by a consortium of credit companies seeking to create a secure authentication system for credit cards. While it's been widely used in Europe, it is currently being adapted for use in the United States.  EMV cards contain a chip much like an RFID. In Europe, the most common form of EMV is a chip & pin setup- since every card has a chip and to authenticate the user enters a personal pin number, much like how a debit card pin works.

Last week, we attended a NYPAY event listening to a panel of experts discussing EMV and how the implementation of EMV was going. The panel had a mixed of payment/EMV consultants, a representative from MasterCard, and 2 representatives from retailers, namely Ralph Lauren and Boscov Department Store. Here is what we learned.

1. EMV uncertainties lead to confusion.

Confused by EMV? You are not alone. Everyone on the panel (and audience) agreed on one thing- CONFUSION. Despite the 2015 EMV mandate, there is no clear standard that has been issued by the card associations. One of the panelist used the analogy of building a house before an impending deadline, but not being given a blueprint of what to build to describe the current EMV confusion. The confusing adds to already burdensome upgrade to EMV in terms of time and cost.

2. Biggest benefit of EMV is the liability shift.

When you accept an EMV card in your store and the card turns out to be a cloned card, the issuing bank takes the liability of that fraudulent transaction.  However, if a chip enabled card is presented at your store and your POS does not support chip enabled cards, and that card turns out to be a clone, then there would be no liability shift to the issuing bank, and you, the merchant, bear the burden of the the liability.  This liability shift does not apply to traditional magnetic stripe cards. So it really comes down to how widely the issuers will adopt EMV (issuing new cards to customers) and how much of your typical customer base will being usign chip enabled cards. Since there is a cost of upgrading to chip-enabled POS, it's cost/benefit analysis.  Does it outweigh the risk of liability for taking fraudulent chip-enabled cards?

The 2015 EMV mandate is not really a do-or-die mandate. If I understood the panelists correctly, the 2015 "mandate" is not an absolute requirement. It doesn't mean that you must only accept EMV cards or cease to accept credit card payments altogether. The mandate just means that there will be no liability shift if your POS system does not support chip-enabled cards.

3. Chip & Pin is for Europe, Chip & Signature for the US.

EMV can take the form of chip & pin or chip & signature. Europe and Asia have largely adopted chip & pin, but it looks like that US will go the route of chip and signature. Chip & pin is more secure than chip & signature, as we all know that our scribbles are usually accepted as our signature without questions asked.  It is unclear how this will affect the liability shifting and what is required of the merchants to make sure the signature is valid to benefit from liability shifting.

4. Expect fraud to shift online.

Merchants are fed up with fraud. Although it was a "payment" event, fraud was a central theme in the discussion. The representatives from retailers believe that the card associations are not doing enough to help the merchants to prevent fraud, while the other side touts EMV as its solution to fraud problems.

If history is any indication, we are likely to see mixed results. When the UK instituted EMV, card present (in person) transaction fraud declined.  According to a working paper published by the Federal Reserve Bank of Atlanta early last year, the adoption of chip & pin led to the reduction of domestic card-present fraud in the UK.  However, the Fed paper points out, the adoption of chip& pin caused "a migration to other types of fraud, namely card-not-present (CNP) fraud and cross-border counterfeit fraud." So with EMV adoption, we are likely to see fraud shifting from offline to online as well as more counterfeit cards used in the US at the POS.

5. Merchants are waiting until there is a clear roadmap.

A lot will come down to issuing banks and their decision to issue chip enabled cards.  Without a broad mandate from the government, those decisions will be based on each issuing bank's P & L analysis.  Merchants should also perform their P&L analysis to see if investing in an EMV upgrade is worth the liability shift.