The Chargeback Challenge

[ArticleBot]

This is an article discussion thread for discussing the SitePoint article, "The Chargeback Challenge"

[samson]

great article, should answer alot of questions regarding chargebacks

[trogdor1024]

EXTREMELY informative and a great read!

[mmj]

When you (the seller) receive notice that the chargeback process has begun, you usually have about 30 days until the processing bank takes the funds out of your account. However, don't be mislead by this - you may only have about a week in order to try and prove the chargeback shouldn't occur. If you did have incontestible proof that the transaction was legitimate and you present it too late - even if the funds have not yet left your account - then the chargeback will still go through and cannot be stopped.

To stop the most common types of chargeback, you will need to produce a document signed by the buyer that proves the buyer received the product. Usually an online seller will not have such proof, so there's usually nothing you can do to stop a chargeback unless you manage to get a delivery slip from the courier really really quickly and fax it off to the merchant as fast as you can.

Remedy: If the merchandise was delivered, send all evidence of the delivery to your processing bank.

From experience, the only such evidence accepted would be something with the buyer's signature on it. Proving that it was delivered is not enough; you need to prove it was received by the buyer.

[CardinalCommerce]

Great article, however the statement regarding Verified by Visa and MasterCard SecureCode is false. They are fully supported by all payment processors, as required by Visa and MasterCard, and most of the major payment gateways now offer a solution. Over 300 million cardholders are enrolled in the programs, and some of the biggest merchants in the world are using it now, including Walmart.com, Hotwire.com, and TigerDirect.com.

The facts are, VbV/SecureCode reduces a typical online merchants chargebacks by 60-70% on average. Nothing you do this year to reduce chargebacks and related costs will have a greater impact on your business than payer authentication with VbV/SecureCode.

For more info, visit this thread on 3-D Secure payer authentication:
http://www.sitepoint.com/forums/showthread.php?t=206728

[stymiee]

Originally Posted by mmj

From experience, the only such evidence accepted would be something with the buyer's signature on it. Proving that it was delivered is not enough; you need to prove it was received by the buyer.

This is very true and unfortunate but not always the case. I have had discussions with not too few merchants who have won chargebacks because they were able to provide some excellent evidence to support their claims. Granted, they are in the minority but because they did everything properly and didn't give up, they actually won their chargebacks. But it is still true that without an imprint or cardswipe w/signature it is an uphill battle to win a chargeback.

Originally Posted by CardinalCommerce

Great article, however the statement regarding Verified by Visa and MasterCard SecureCode is false. They are fully supported by all payment processors, as required by Visa and MasterCard, and most of the major payment gateways now offer a solution. Over 300 million cardholders are enrolled in the programs, and some of the biggest merchants in the world are using it now, including Walmart.com, Hotwire.com, and TigerDirect.com.

The facts are, VbV/SecureCode reduces a typical online merchants chargebacks by 60-70% on average. Nothing you do this year to reduce chargebacks and related costs will have a greater impact on your business than payer authentication with VbV/SecureCode.

VBV and SC are excellent tools for preventing chargebacks (as I stated in my article). But here's the problem: how many merchants are actually using it? Or, even more important at this point in time, how merchants are even aware of them? Or how many cardholders are even aware of the program? 300 million cardholders are enrolled, I bet I am too, but have no clue the programs exist. At this point in time those programs are still in their infancy as far as implementation goes. The infrastructure may be in place, but until merchants are informed and make use of them, their impact is extremely limited.

[Hierophant]

Originally Posted by stymiee

VBV and SC are excellent tools for preventing chargebacks (as I stated in my article). But here's the problem: how many merchants are actually using it? Or, even more important at this point in time, how merchants are even aware of them? Or how many cardholders are even aware of the program? 300 million cardholders are enrolled, I bet I am too, but have no clue the programs exist. At this point in time those programs are still in their infancy as far as implementation goes. The infrastructure may be in place, but until merchants are informed and make use of them, their impact is extremely limited.

Since the infrastructure is available, wouldn't it be prudent to discuss this a little more in the article? I mean a merchant interested in limiting his liability would work to implement this within their store. Discussions on how to implement that, which processors and providers accept it and how to direct customers to register with the services easily would be in the merchants best interest.

Instead of dismissing the technology as too early, tell merchants how to implement it. Only through implementation will it become a true solution.

[stymiee]

One of the goals of this article was to spur talk and raise awareness of chargebacks and chargeback prevention. Mike's Thread on VBV and SecureCode is an excellent read. It would be great if he'd elaborate on how they can be implemented as I'm sure he would have a captive audience. I'll also admit my knowledge of those technologies is very limited and therefore I would be a poor choice to explain them further.

[Hartmann]

Great article John! I've passed it along to a number of coworkers.

[beley]

Great article... will be a resource I refer thread posters to for some time to come!

[comfixit]

Just to add to the tips presented in the article, if your selling something that can easily be sold on the streets such as a video game or small consumer electronic you may want to be warry of shipping the item to a different address then the billing address.

Several times when I was working at a video games online retailer they recieved seemingly legit orders, that were delivered to out of state addresses that turned out to be fraudulent.

The police stated that a common tactic is to place an order with a stolen credit card number ship that item to a known vacant address with a carrier who will leave the package at the door. They know the time of delivery, wait for the carrier to drop the package and they pick it up.

To remedy the charges all the online merchant needs to do is show that they made an imprint of the card or the sales reciept with the signature, unfortunetly we didn't require signatures on deliveries, so the company i worked for had to eat the costs. This happened even though the credit card company approved the transaction. So be wary.

nice primer on the subject... we should all take heed

[fabrizio]

Great article, I think there is only one lack: the author did not mention about who sells digital goods. My company sells digital sheet music and we are maybe, as well who sells software for instant download, the most risky businesses on the web. This should be mentioned.

Thank you anyway for the article, very interesting.

Sincerely,
Fabrizio Ferrari
Virtual Sheet Music, Inc.
http://www.virtualsheetmusic.com

[realestate]

Very valuable info for new merchants. Voted 10.

[Hierophant]

Originally Posted by fabrizio

Great article, I think there is only one lack: the author did not mention about who sells digital goods. My company sells digital sheet music and we are maybe, as well who sells software for instant download, the most risky businesses on the web. This should be mentioned.

Thank you anyway for the article, very interesting.

Sincerely,
Fabrizio Ferrari
Virtual Sheet Music, Inc.
http://www.virtualsheetmusic.com

Yeah. Unfortunately if you sell digital goods you have almost no recourse when someone complains that they didn't purchase it. You have to suck up the loss and move on.

Though I work for a company that sells digital goods, I would never get into such a business for myself. There would always be some sort of hard good involved with the sell.

[Musicbox]

very nice article.

I also run an online (ASP) site - Here is what we do to disputing charge-backs:

1. We have a standard word document detailing out our License Agreement.
2. We have a screenshot of the "user signup" page with the checkbox indicating agreement.
3. We store IP/Timestamp logs for all users when they login to their accounts.

Using the above info, our merchant bank usually sides with us when they see that the user has indeed logged into the account and used our services.

My $0.02 ;-)

-v

OH ! , we forgot to mention the charges incurred when a chargeback does go in favor of the Merchant. Carservice International charges a $25.00 fee as soon as the chargeback is initiated, whether the merchant wins the dispute or not !

I asked them if it was okay for me to charge my customer that fee and they said it was illegal...funny how THEY get to make all the rules and determine what is legal or not. My customer screws up and agrees to the charge after they placed a chargeback and the merchant still gets screwed ...

Jim

[CardinalCentinel]

Originally Posted by stymiee

One of the goals of this article was to spur talk and raise awareness of chargebacks and chargeback prevention. Mike's Thread on VBV and SecureCode is an excellent read. It would be great if he'd elaborate on how they can be implemented as I'm sure he would have a captive audience. I'll also admit my knowledge of those technologies is very limited and therefore I would be a poor choice to explain them further.

Stymie,

I agree with you. We will try and put together an "Implementation 101" type post. We have to make sure we obey the TOS of SitePoint since we are a primary vendor. We will do our best

mr

[Hierophant]

That is simple. Just write an article on implementation and submit it to the editor of SitePoint. There is no such rule there.

[exoticpublishing]

I haven't read this article b/c it is very very long & I just came across it, but I'm looking for a really good chargeback prevention site that doesn't break the bank.

Any recommendations would be helpful if you could PM me.

I have a few bookmarked, but it's been a while since I looked into the issue.

Thanks & have a great wknd. : )


Michelle

Add a section that warns people not to get lured into setting up a PayPal account and accepting credit cards through them. There is absolutely no chargeback protection through PayPal and they will freeze your accounts and take back money from valid transactions in order to cover the fraudulent chargeback, and you never get the merchandise back either. A real merchant account has significantly more protection.

Perhaps NoPayPal has a monitary intrest in badmouthing payPal? or perhaps it is reveng for being caught? we will never know since noone has evet been born with the name NoPayPal. PayPal is annomous and I'm sure they have a process to check before doing a chargeback. Merchants should read the agreement for the process and be ready to defend when a fraudlent chargback occures. which is just what this article said using Visa and MasterCard as examples

[Corey Bryant]

Originally Posted by exoticpublishing

I haven't read this article b/c it is very very long & I just came across it, but I'm looking for a really good chargeback prevention site that doesn't break the bank.

Any recommendations would be helpful if you could PM me.

I have a few bookmarked, but it's been a while since I looked into the issue.

Thanks & have a great wknd. : )

Michelle

Michelle, I did PM with one article and some ideas as well, unless you caught over at the GID or SBA forums.

[fabrizio]

I really would recommend to read the following Corey's article about chargebacks:

http://www.small-business-forum.com/articles/52.html


it expands the chargeback issue to not well known deals...

Thank you Corey.

Fabrizio.