If you’re an e-commerce merchant in a high-risk industry such as CBD, adult entertainment, and dating, you are no stranger to challenges. One of the most daunting situations you might face is receiving a chargeback or fraud alert from a credit card company. In this post, we will explore steps you can take when confronted with such alerts, provide strategies for responding effectively, and discuss how an experienced payment processor can be your ally in mitigating alerts, creating an action plan, disputing chargebacks, and managing the complexities of monitoring programs.

What is a chargeback?

A chargeback occurs when a customer disputes a transaction with their credit card issuer, seeking a refund. Typical reasons for a chargeback dispute are unauthorized transactions, dissatisfaction with the product or service. Chargebacks can have significant implications for merchants, including financial losses and potential damage to your reputation, as well as worsened approval ratios for future transactions

What is the VISA and Mastercard Fraud and Chargeback Monitoring Program?

VISA and Mastercard have established monitoring programs to track and assess the chargeback and fraud rates of merchants. When a merchant goes over certain thresholds for chargebacks or fraudulent activities, they may be placed into a monitoring program. This program is designed to watch and assess the merchant’s activities, with the goal of reducing chargeback rates and maintaining the integrity of the payment ecosystem.

What steps can merchants take in advance of entry into a monitoring program?

• Partner with an Experienced Payment Processor

The first and most crucial step is to engage an experienced payment processor with expertise in high-risk industries. A knowledgeable payment processor can assess your situation, understand the reasons for the chargebacks, and work with you to create a tailored action plan to address the issues.

• Implement Fraud Prevention Measures

Prevention is key to exiting a monitoring program successfully. Robust fraud prevention measures safeguard your e-commerce platform. These measures may include upgrading security protocols, enhancing identity verification processes, and leveraging advanced fraud detection tools. An experienced payment processor should offer these measures to their clients to reduce the risk of future chargebacks.

• Maintain Transparent Communication with Customers

In high-risk industries, maintaining transparency with customers is essential. If the alert message is related to a specific issue or transaction, communicate openly with the customer. Provide clear and concise information about the situation, the steps you are taking to resolve it, and any potential impact on their orders or accounts. Transparency builds trust and can help mitigate any negative impact on your brand reputation.

Keep customers informed about any changes in policies, procedures, or security measures implemented to address chargebacks. Transparent communication not only helps retain customer trust but also reduces the likelihood of future disputes.

• Maintain Clear and Detailed Records

Maintain clear and detailed records of all transactions. This includes order confirmations, shipping details, and customer interactions. Having comprehensive documentation can serve as a powerful tool when disputing chargebacks. If needed, provide this information to the payment processor to strengthen your case and show the legitimacy of the transaction.

• Understand Chargeback Reason Codes

Chargebacks come with specific reason codes that indicate the rationale behind the dispute. Familiarize yourself with these codes because they can provide insights into the nature of the chargeback. Understanding the reason behind the dispute lets you tailor your response more effectively. Your payment processor can help interpret these codes and formulate a targeted response to the credit card company.

• Stay Informed About Industry Regulations

High-risk industries often come with complex and ever-evolving regulations. Stay informed about the latest industry regulations and compliance requirements. This proactive approach can help you anticipate potential issues and make sure that your business operates within the legal framework.

• Have a robust customer support solution in place

Supporting your customers is a crucial process in doing business. It is highly recommended you ensure procedures are in place to handle users complaints. A refund on time means an avoided chargeback or fraud hit. Make sure your customer support department handles complaints in a timely manner.

What can high-risk merchants do if placed into a chargeback monitoring program?

Merchants in credit card monitoring programs can take some strategic steps to manage the challenges. Here are a few tips to implement immediately, to both prevent and reduce the impact of chargebacks and the monitoring program.

• Conduct a Comprehensive Analysis of Chargebacks

Work with your payment processor to analyze the chargebacks that led to your entry into the monitoring program. Take the time to review and verify recent transactions associated with the alert. Ensure that all customer information, billing details, and order histories are accurate. This step is crucial for identifying any potential discrepancies or fraudulent activities.

Your payment processor can assist you in conducting a thorough review and guide you on how to address any irregularities. A comprehensive analysis identifies patterns, common reasons, and any underlying issues contributing to the chargebacks.

• Provide Compelling Evidence

When disputing chargebacks, presenting compelling evidence is crucial. This may include order confirmations, tracking information, customer communication, and any relevant policies displayed on your website. Work closely with your payment processor to compile a strong case that addresses the specific concerns outlined in the chargeback reason code.

• Develop and Implement an Action Plan

Collaborate with your payment processor to develop a comprehensive action plan that addresses the root causes of chargebacks. This plan should include specific steps to improve customer communication, streamline order fulfillment processes, and enhance overall customer satisfaction. A well-executed action plan shows your commitment to resolving issues and can expedite your exit from the monitoring program.

• Monitor and Assess Progress

Continuously monitor and assess the progress of your action plan. Regularly review chargeback rates, customer feedback, and any other relevant metrics. Your payment processor can assist in tracking key performance indicators and adjusting the action plan as needed. Demonstrating consistent improvement is essential for a successful exit from the monitoring program.

• Collaborate with the Card Companies

Maintain open communication with VISA, Mastercard, or other card companies involved in the monitoring program. Keep them informed about the steps you are taking to address chargebacks and enhance transaction security. Establishing a cooperative relationship can help pave the way for a smoother exit from the monitoring program.

The Bottom Line

Chargebacks and monitoring programs can be challenging for e-commerce merchants in high-risk industries. Taking preventative measures with the support of an experienced payment processor, can help merchants to build a more resilient and secure business.