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Can your Business be Affected by Chargeback Fraud? How it Works & How to Protect your Business!

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Petra Nna .Jun 3, 2023

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Table of Contents

  1. What are Chargebacks?

  2. When can chargebacks affect your business?

  3. How to protect your business from chargeback fraud.

  4. How Bumpa can help you Protect your Business from chargeback fraud.

  5. Final Tip: How to Fight a Chargeback Fraud Case.


Picture this scenario.

You sell bags online, and a customer places an order for a bag via your website. Of course, you’re happy to serve the customer. After they’ve made payment, you proceed to fulfil the order - you package it, and ship it off to the customer via a delivery service. After delivering successfully, the delivery man informs you, and you close that sale, assuming that it’s done. Then a few hours later, you get a message from the customer asking where their delivery is.

Now, you’re confused because the last time you checked, their order had been delivered. But they’re insisting that nothing like that has happened and that they’re yet to receive their package. The next logical step would be for you to show proof of delivery, which should ideally be something along the lines of the customer signing and agreeing that they’d gotten the package.

But alas, you have no such thing! All you have is word of mouth from your delivery man and to be honest, that doesn’t prove anything. You’re left with the problem of having to placate an increasingly irate customer, but the customer doesn’t want any of that and reaches out to their bank to complain about a transaction on their card for an item they didn’t get. Now, the bank investigates and since you have no proof that the item was actually delivered, decides to send the money back to the customer and take it out of your account.

Now, you’ve lost both money and product.

Can your Business be Affected by Chargeback Fraud? How it Works & How to Protect your Business!

What I’ve just described is a chargeback situation. Sometimes, business owners, especially those who sell their products online, may not be aware of how vulnerable their business is to chargebacks and the consequences. Even when they are, they do not know how to go about protecting their business from it. Today, we’re going to be covering what chargebacks are, how they can affect your business and what you can do to protect yourself and your business from them by using Bumpa.

Related: A Guide on Expanding Your Small Business: How to Expand, What to Know & What Products to Sell

What are Chargebacks?

Chargebacks are transactions in which a consumer disputes a purchase made with their payment card and requests their payment be reversed. A chargeback can be initiated by the cardholder, the bank, or the payment processor, and it is a common method used to protect consumers from fraudulent transactions.

But, flip the last line. It is also a common method used to commit fraud against business owners, and those are called fraudulent chargebacks.

Chargebacks can be costly and can negatively impact a merchant's reputation and bottom line, and therefore merchants must try to prevent them by providing excellent customer support, resolving any disputes promptly and making sure that they’re also protected from chargeback fraud.

When can chargebacks affect your business?

There are actually multiple reasons a customer might request a chargeback, and some of them are listed below:

  1. When you deliver a product to a customer way past the delivery date. For example, if a customer needed to use the item they ordered from you on a particular date and you were supposed to deliver the item before then, didn’t and then delivered much later, they might feel that the item will no longer be of use to them, and request a chargeback.

  2. When you send a bad product to a customer.

  3. When you send an item that does not match what was seen or ordered in the store.

  4. When there’s an error in billing.

  5. When someone uses their card and placed an order, without their permission.

  6. When they have a subscription for your business and meant to pause or cancel, but didn’t do that on time.

  7. When what they ordered was never delivered to them.

While some of these reasons might be legitimate, not all chargebacks are real or legit. Some of these claims are made by customers to defraud a merchant…but then how do you as a business owner handle it? Banks almost always favour the customer in situations like this, and that is why it is important to take proactive measures to protect your business from chargeback fraud.

How to Protect Your Business from Chargeback Fraud

Chargeback fraud can hurt your business, and not just financially. They can also damage the credibility of your business because frequent chargebacks can lead to negative reviews, articles and social media comments, which will directly impact your customers’ view of your business, thereby reducing sales and customer loyalty.

So, how do you protect your business from chargeback fraud?

1. Have a clear return or refund policy:

It’s easy for people to scam you when there’s no clear documentation on your policy for refunding or returning a product (basically, the rules and conditions in which you’ll refund a customer for the purchase or accept a return for an item that has already been delivered) so you should make sure to set one, and also make sure that your customers understand it.

2. Gather and save delivery proof:

Let’s go back to the example at the beginning of this post. If you have proof of delivery, for example, a signed document from the customer, then you have evidence to dispute the chargeback. You should always ask your delivery service company to send out their dispatch riders with forms that customers can fill and sign, to protect your business.

3. Improve your customer service:

Prompt responses and the right attitude and answers can go a long way in reducing the likelihood of chargebacks that result from an unhappy customer who’s dissatisfied with the service or the product. Remember when we mentioned the scenario where a customer got their order delivered way after the delivery date had passed and they no longer needed the product? This is a case that open, effective and polite conversation would fix; by simply communicating with the customer and giving them updates, you can prevent them from getting upset enough to initiate a chargeback.

Related: 10 Easy Tips on Improving Customer Service for your Small Business

4. Don’t ship the wrong item, or sell damaged products:

Always make sure you sell quality items with clear product descriptions, size, colour and more so that the customer knows exactly what they’re buying from you. It’s almost a given that a customer who is dissatisfied with what they ordered will initiate a chargeback.

How Bumpa can help you Protect your Business from Chargeback Fraud.

Bumpa provides you with a series of tools that can give you the evidence you need if you’re ever in a chargeback fraud situation.

1. With Bumpa, every order that goes through your website triggers an automatic confirmation email sent to the buyer. This reminds the customer that they have placed an order, and gives them the opportunity to change their mind if they want to and cancel the order while they can. Check out what it looks like in the screenshot below.

2. You can send invoices and receipts to your customers, and you can also retrieve a copy of receipts for your sales anytime you want by simply sending a copy to your phone or email from your Bumpa app. This receipt contains the date of payment and all the information about the customer!

Related: Discover 10 Things Bumpa App Can Do for Your Business in 1 Minute!

3. With your Bumpa app, you can easily track the detail of every single order and sale you make, from any channel you sell on. This makes it easy for you to pull information about any sale, and gather the data or evidence you might need if you have a fraud case on your hands.

Final Tip: How to Fight a Chargeback Fraud Case

Once you know for sure that you have a fraud case on your hands, then you need to gather the evidence, reach out to the back that approved the chargeback and present it to them. The evidence here could include the order confirmation page, delivery updates, invoices and receipts, conversations if any and everything you have regarding the transaction. Make sure that your evidence is as organised as possible. It is recommended that you use the Bumpa app for your business so that you can readily have some of these listed above available to you, at any time!


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