Can you manage chargebacks?

by 300cbt Team

October 08, 2018

“Losses due to chargebacks in 2017 were $19 billion”

When selling overseas online, everyone experiences a chargeback at least once. In Korea, thanks to the meticulous(?) online payment method, it is not uncommon for a chargeback to be applied (from the buyer's perspective) or for a seller to receive a chargeback request. In the case of overseas merchants (sellers), chargebacks are common, so in some ways, Korea may be seen as a strange country where chargebacks are close to 0%. If I were to explain the cases around me, there were "a case where I canceled a one-year membership to a gym, but the gym closed 6 months later," and "a case where I bought a watch on eBay and received a counterfeit product." In both cases, I applied for a chargeback from my credit card company. Refunds are possible and I actually have experience helping people get refunds.

In this way, chargeback is a system in which the card company is responsible for purchases made using a credit card. For domestic cards, a chargeback can be requested from the financial company that issued the card, and for overseas transactions, transaction mediation can be requested through the issuer through Visa or Master. It is a natural right of credit card users. Card companies explain points and benefits in detail, but why don't they explain chargeback?

What is a chargeback experienced by a seller?

To summarize, chargeback is a process in which a credit card holder requests a refund of the amount charged or is unable to pay to the card issuing bank or card company. Especially in the case of overseas payments, if you do not receive the product or the product you ordered is different from the product you actually received, you can receive a refund for the amount you paid through chargeback. In this case, the buyer must submit proof of this to the credit card company, and when a chargeback case is opened, the seller who sold the product must submit proof of the buyer's request. From the seller's perspective, when a chargeback request is received, a chargeback fee of $20-$25 is charged regardless of whether the chargeback is won or lost. Chargeback is a tedious process that usually takes 2-3 months to reach a final conclusion.

▲ Chargeback process

So why do customers open chargeback cases?

According to the Identity Theft Resource Center, there were 133,015 chargebacks reported in the United States in 2017, making it the largest credit card dispute. There are many reasons why a chargeback case is opened. Let’s look at the reasons in detail.

▲ 2018 Fraud Trends Source: Javelin

1. Dissatisfied with purchase

The most common case in e-commerce is when a buyer opens a chargeback case without contacting the seller due to dissatisfaction with the product. This happens to me sometimes too. It would be better if they contacted me first, but there are some impatient(?) buyers everywhere who immediately open a chargeback. In other cases, after exchanging several messages, a case may be opened because the problem is not resolved as the buyer intended. In these cases, if you actively communicate with the buyer and show your will to resolve the case as much as possible without dragging the case out too long, most cases can be closed early.

2. Buyer's illusion

This is when a buyer receives a credit card bill and thinks, “I don’t think I paid for this” and opens a chargeback case. In most cases, if you do not remember the purchase history, your child may use the parent's ID to make payments on marketplaces such as eBay and Amazon without parental consent. This can be said to be a negative effect of the automatic login function that has become common these days.

3. Delivery issues

If a chargeback is opened because the buyer did not receive the product, the seller must submit a tracking number and proof of delivery showing that the buyer received the product. Proof of delivery is usually submitted as a screenshot from a tracking site, and completion of delivery must be shown to defend against chargebacks. If only customs, not the shipping fee, is checked, there is a high possibility that you will lose.

About chargeback defense

PayPal and overseas PG companies operate their own fraud prevention systems. Nevertheless, if a chargeback case is opened, it is likely that the claim is due to the buyer's dissatisfaction. For this reason, it is important for sellers to quickly submit relevant materials when a case is opened and close the case early.

If the product you are selling is an expensive product worth hundreds of dollars or more, you can reduce chargebacks due to card theft by requiring the first two digits of the password when paying by card. A representative chargeback-related program is Signifyd . Signifyd protects sellers through analysis of social channel data as well as billing and shipping addresses on the site when buyers pay, and compensates for losses through chargebacks for payments made using the Signifyd app.

▲ Chargeback protection app Signifyd

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If you sell overseas, chargeback is unavoidable. However, efforts are needed to reduce the number of incidents by promptly communicating with customers and clearly stating refund and delivery policies.

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