| Joe Q. Merchant, a successful e-commerce business | | | | policy.If a product was purchased, the customer |
| owner, opens a letter from the Chargeback | | | | must return it before a chargeback can be initiated - |
| Department of his credit card processing company. | | | | at least if the customer used a Visa or Mastercard. It |
| "What's this?" he wonders, intuitively knowing that | | | | is then up to the merchant how to proceed (i.e., to |
| this can't be good news. His suspicions are proven | | | | either grant or deny a refund). Disputes regarding a |
| correct when he reads this retrieval request form | | | | service fall in a very gray area. While it is mandatory |
| where he must provide information about a particular | | | | that the customer attempt to work out an |
| transaction. While no specific reason is offered as to | | | | agreement with the merchant before attempting to |
| why this request has been initiated, Joe knows that | | | | charge back payment, such a conference may result |
| he must comply to avoid a chargeback - where | | | | in a stalemate. The almighty refund policy may help |
| funds can be taken out of a merchant's account due | | | | the merchant but if there are loopholes, the |
| to a variety of reasons and placed back into a given | | | | customer may very well be deemed victorious. And it |
| customer's account.Joe ponders what went wrong | | | | should be clear that any "tie" goes to the customer; |
| with this particular transaction. Is it possible that a | | | | if the merchant cannot provide conclusive evidence |
| member of his staff accepted an invalid credit card | | | | that services rendered were thorough and |
| (e.g., expired date)? Has there been a processing | | | | appropriate or if there exists reasonable doubt, Joe |
| error (e.g., an input error has been committed where | | | | Q. Merchant will not only have lost time with the |
| the wrong account has been charged)? These | | | | customer but his money. And if the customer asserts |
| scenarios are very unlikely, Joe decides. In all | | | | that services were not rendered at all, Joe needs to |
| probability, a customer has either disputed a) the | | | | show evidence of his work to the processing bank or |
| validity of the transaction (i.e., whether the customer | | | | a contract that spells out that he intended to provide |
| has authorized the transaction) or b) the quality of | | | | service on a future specified date. Again, any |
| the service and/or product (i.e., the customer has | | | | inconclusivity that Joe fulfilled his obligation or planned |
| voiced dissatisfaction and wants a refund).According | | | | to will result in a thinner wallet for Joe.Although Joe |
| to guidelines set by Visa, Mastercard, American | | | | Q. Merchant was quick to dismiss the notion that a |
| Express and Discover, Joe Q. Merchant must reply | | | | point-of-sale processing error transpired, he needs to |
| with written correspondence, providing all the | | | | realize that there exists the possibility for human |
| requested information - in an expedient fashion - in | | | | error on any given transaction. What happens, for |
| an attempt to rebut any possible chargeback. (A | | | | example, if a customer has inadvertently been billed |
| review committee will eventually render a decision as | | | | twice for a product or service? What happens if a |
| to the legitimacy of a chargeback.) But the retrieval | | | | customer cancelled a recurring billing charge but was |
| request has indicated the date that this information | | | | still assessed a charge? In business, attention to detail |
| must be received. If the merchant offers evidence | | | | is a must. But if Joe or a member of his staff erred, |
| of a transaction after this date, a chargeback will | | | | a credit to the customer must be issued |
| ensue and the merchant will automatically lose those | | | | posthaste.Of course, the best way to prevent |
| hard-earned dollars that he/she may have already | | | | chargebacks starts with Joe's actions and not |
| spent.Online merchants, such as Joe, have more | | | | necessarily the customer's actions. Are safeguards in |
| difficult obstacles to overcome than retail merchants | | | | place to prevent processing errors? For instance, on |
| in the resolution of chargebacks. After all, those who | | | | phone orders, do the merchants' representatives |
| generally swipe credit cards have a transaction slip or | | | | ensure that every given digit, including the expiration |
| receipt. If a card does not swipe through a credit | | | | date, is absolutely correct? Are orders confirmed by |
| card terminal, retail merchants must run the card | | | | fax?; Are phone numbers checked with directory |
| through a manual imprinter to prove that the | | | | enquiries?; Are customers contacted back by phone |
| transaction was authorized. In contrast, those who | | | | to confirm the telephone number?Internet orders |
| run businesses online will not have such a physical | | | | need to be evaluated, too. Are fraud-preventative |
| receipt proving that the customer authorized the sale. | | | | devices, such as the AVS and CVV2/CVC2 code |
| This is why online transactions are categorized as | | | | employed? Was the customer's address verified by |
| "card not present" or "customer not present."Every | | | | calling the card issuing bank's Voice Authorization |
| year, a myriad of chargebacks result when | | | | Center? (Alternatively, the merchant can |
| customers claim that they never received the | | | | automatically decline any transaction where there is |
| merchandise. In such instances, it is imperative that | | | | an AVS mismatch.) Is the refund policy easily |
| the merchant has a proof of delivery notice, | | | | accessible and observable on the website? Does a |
| indicating the date with the customer's signature. If | | | | recognizable Doing Business As (DBA) name with a |
| the signature on this notice belongs to another | | | | concomitant phone number appear on the customers' |
| individual (e.g, neighbor) or even if the customer | | | | statements? Are signed delivery receipts |
| claims that he/she never signed for the item | | | | obtained?Logic and intuition are powerful tools in |
| (signature is not clear), the merchant can lose the | | | | preventing chargebacks, too. If Joe Q. Merchant has |
| chargeback. It is always best that an online merchant | | | | an uneasy feeling about a transaction (e.g., the |
| use the Address Verification system (AVS) to ensure | | | | customer is willing to pay additional fees for faster |
| that the address listed on the customer's credit card | | | | delivery for a high-ticket item, the customer has a |
| matches the billing address. Moreover, it is advisable | | | | domestic billing address but a foreign shipping |
| to check for Visa's CVV2 code or Mastercard's CVC2 | | | | address, etc), he needs to proceed with caution. |
| code - the three digits printed on credit cards near | | | | High-ticket items are profitable but risky and Joe Q. |
| the signature panel in the back of the card - to help | | | | Merchant must especially perform his due diligence |
| determine the validity of a sale. This aides the | | | | with such transactions.A yellow light should also |
| merchant in helping to identify a cardholder in a | | | | appear for any foreign order, particularly those that |
| non-face-to-face transaction.Of course, the merchant | | | | originate from certain problem countries like |
| may then insist that the billing address and ship to | | | | Singapore or Indonesia. Indeed, Joe needs to weigh |
| address be the same to reduce the possibility of a | | | | the benefits vs. the potential cost of doing business |
| chargeback. (As an added measure of protection - as | | | | outside the States.Although chargebacks can raise |
| a proactive maneuver - a merchant may fax a | | | | their ugly head for any merchant, Joe Q. Merchant |
| customer an order or invoice form and ask that the | | | | realizes that by taking a thorough, hands-on and |
| form be faxed back so that the customer's signature | | | | cautious approach, he can substantially reduce or |
| may be on file. In another scenario, if the customer | | | | eliminate their occurrence. As an added measure of |
| has initiated a chargeback for non-delivery of goods, | | | | protection, Joe will conduct business ethically and |
| before 30 days has elapsed from the time that the | | | | responsibly and reach out towards his customers to |
| transaction occurred, the merchant can respond that | | | | ensure their satisfaction. He will, for example, describe |
| ample time for shipment was not provided - | | | | products and/or services with accurate descriptions, |
| especially if he/she can submit the terms of | | | | provide a clear and fair return policy and establish |
| agreement, indicating the delivery date. If the | | | | dialogue, whenever possible, with the customer - |
| merchant knows that delivery will be delayed, it is | | | | either before, during or after a given |
| imperative to contact the customer should the | | | | transaction.Advancing technology, to better identify |
| customer derive the conclusion that the shipment | | | | customers (e.g., Verified by Visa or SecureCode |
| was never made. Moreover, at least with phone | | | | provided by Mastercard), will serve to reduce fraud |
| orders, the merchant may even decide to postpone | | | | and/or limit chargebacks. But until technology catches |
| charging the card until the delivery is near completion | | | | up with the oft-unpredictable world of e-commerce |
| or completed.The retrieval request/chargeback battle | | | | chargebacks, Joe Q. Merchant can look towards one |
| becomes even more complex if the customer claims | | | | reliable stop-gap measure: himself.Copyright 2006 |
| that the product or service does not live up to the | | | | William HamiltonWilliam Hamilton owns a payment |
| customer's expectations. If this has occurred, Joe Q. | | | | processing company, IntelliCollect (a subsidiary of |
| Merchant needs to submit his refund policy and proof | | | | United Bank Card), a firm offering cost-effective |
| that the customer was made aware of such a | | | | payment processing solutions. |