Regulators largely dismiss it but businesses are suffering under the weight of unfair chargebacks. One retailer though has outlined some clever strategies for minimising their occurrence.
My Business investigated the issue of chargebacks earlier in 2017 after a tip-off from a reader, and found that regulators were largely unaware of the concerns about unfair chargebacks. So much so, it proved to be quite an effort to track down the official processes for disputing such claims.
Matt Blatt founder Adam Drexler said he faces an estimated “30 or 40 cases of it” each year, however it used to be considerably higher, and it almost always pertained to online purchases.
“So we manage it in a few different ways. We might call the customer up – they leave a mobile number, call them up, talk to them, get a sense of feeling of how nervous they are or what sort of person they come across as. [But] it’s not a foolproof method,” he told My Business.
“Or we might ask them to show identification, take a photo of your driver’s licence and send it to us by email.”
However, it is the use of nominal charges to a card for verification that Adam said proved to be a “pretty good” means of reducing chargebacks.
“We would process the payment, take $10 out of their account and contact the customer, ask them ‘look into your bank statement online and tell us how much we took out’,” he explained.
“If they can’t tell us then they – you know, someone … doesn’t have access online to your bank account, so they would not be able to say: ‘Oh you took out $10.50’.”
“I wouldn’t bother with a $100 or $20. If someone’s going to rip you off, they’re not going to just do it for a small amount,” he said.
The proof, as they say, has been in the pudding.
“We catch out fraud all the time,” said Adam.
However, he admitted that there is no means of eradicating fraudulent purchases and chargebacks altogether.
“We also get caught out all the time too. And sometimes we send police around and sometimes we go knocking on their door and sometimes we get our money back and sometimes we don’t, but it’s a cost of doing business,” he said.
“You can’t not sell on the internet. Of course you’re going to get ripped off every now and then, but you’ve got to limit your risk.”
Hear more practical insights on boosting growth and curbing risks in business from Adam on the My Business Podcast below: