All You Need To Know About Chargebacks


The business industry is continuously evolving and brimming with new and innovative opportunities. It is essential to tap into these potentials and reap the benefits. For instance, the eCommerce industry has plenty of opportunities for merchants. Whether it is to sell the products or increase their online presence, eCommerce merchants can be benefited in different ways. Along with the benefits, eCommerce merchants have to master a new set of business vocabulary, complicated process of credit cards, fraud protection, payment protection, etc. There are plenty of risks and concerns that merchants need to be aware of. One term that eCommerce merchants will be familiar with is “Chargeback.”

Chargebacks are quite normal in eCommerce as they happen frequently in the industry. But, when chargebacks take a toll on the business and begin piling up, it can result in hiking up both direct and indirect costs. If you are also dealing in the eCommerce industry, it is essential to learn more about chargebacks and safeguard your interests.

All You Need To Know About Chargebacks - Accertify

What Is A Chargeback?

A chargeback is simply a payment fee that the debit/credit card issuer takes up from the merchant against any disputed and suspicious transaction with the cardholder. A chargeback arises when cardholders witness any transaction that is unrecognisable. By noticing the dispute in the transaction, the cardholder will report it to the card issuer. Later, the card issuer will determine whether the claim made by the holder is legitimate or not. For instance, if the card is stolen or the merchant’s product wasn’t delivered, the card issuer will refund the amount to the cardholder and debit the payment to the merchant along with an additional fee. Sometimes merchants can engage in fraudulent chargebacks that can hamper their credibility. Hence, it is essential for all the merchants to provide chargeback fraud management solution that can provide them with comprehensive services for detecting and resolving fraud transactions.

Different Types of Chargebacks

Chargebacks are a secured practice that protects the interests of cardholders from paying on behalf of someone’s fraudulent purchase. At the same time, excessive chargebacks can cause a financial burden on merchants. Chargebacks have indeed become to the aisle for fraud. Hence, it is essential to avail of the services of chargeback fraud management that help in detecting the fraud transactions. It is important to understand different eCommerce scenarios of chargeback. Here are the four chargeback categories every eCommerce merchants need to be aware of-:

● Criminal fraud

It is one of the common conceptions about chargebacks; this type of chargeback occurs when a person uses another person’s card information to make a payment without any authorization.

● Consumer Disputes

Buyers sometimes dispute charge against their statement, even when against the genuine charges. Sometimes consumer’s attempts to fraud are so desperate to create disputes. When the disputes arise from honest mistakes, it is referred to as friendly fraud.

● Authorization Issues

This type of chargeback happens when merchants fail to get proper authorization for a particular transaction when they fail to submit a valid authorization for a transaction.

● Processing Errors

When a consumer gets a realization that the merchant has not met the fair deal, it is deemed as a processing error. For instance, when the cardholder makes the payment, but the goods never arrived or when the cardholder cancels the transactions, but the merchant fails to complete cancellation.

Chargeback Fraud

It is essential to ascertain chargeback fraud for an eCommerce merchant. It occurs when buyers create a false claim against the transaction and requesting a full refund and wish to keep the product. Generally, the chargeback system, by default, favors the buyers over the merchants. According to a survey, 7% of consumers have created a fake scenario for money back.

Friendly Fraud

A type of chargeback that occurs by accident, when there is a misunderstanding. This happens when a customer doesn’t make a purchase, but the purchase was authorized by family members or any unknown cardholder. When the customer is not aware of the merchant’s return policy, then also it is considered a friendly fraud. Customers failed to agree to the recurring payment. This type of chargeback is generally harmless for the merchant and customer. It is essential to understand the difference between the chargeback and friendly fraud.

The Bottom Line

The eCommerce industry is ever-evolving, merchants dealing in this business model are reaping the magnitude of benefits. But along with such advantages, there are a certain amount of risks and issues that merchants need to be aware of. A chargeback is one such practice that can cost them a fortune. It is essential to remain updated regarding the prevalence of chargebacks, types of chargebacks, and chargeback fraud management. Every merchant should understand the working of chargebacks and avail quality chargeback fraud management services from a credible company.