Whiteboard Wednesday #11: How to handle a Chargeback | Clearhaus Learning

If you run an online shop you’re bound to receive a chargeback at some point or another.

A chargeback can occur for an array of reasons and it requires your time and attention.

In this video, we’ll talk about chargebacks; what they are, how they work, and what you should do when you receive one.

We hope you’ll find it helpful and that it will make running your shop a bit easier.

Hi there! Welcome to Whiteboard Wednesday. We’re back again and we’re going to break down into specific details regarding fraud and chargebacks. Specifically chargebacks and go into the process of chargebacks and the most common reasons as well. So chargebacks, there’s many reasons for the consumer to dispute the transaction when the goods and services are sold from your store.

So, the first predominant reason is pure fraud. So, the cardholder sees his statement and says “that wasn’t my transaction. I didn’t do that transaction”. That’s the predominant reason globally. Second, is when your store, the goods and services that you sell, aren’t up to the standard that the consumer expected. So he again, has the right to charge back the transaction if the terms and conditions on your website displaying the product or service is not clear and transparent to him. Thirdly, the description of the goods as well. Not only the goods but also your merchant store, for example, you could be selling iPhones, phones and the description, when he gets his statement, says, for example, ice cream shop. Good example.

It doesn’t marry up, so he would obviously raise a query with his bank to say “I didn’t buy ice cream shop 1,000 Euros”. Just as an example.

And thirdly, and a common theme is reoccurring transactions. Both myself, and I’m sure you as a cardholder, you’ve applied for a service, applied to buy goods or services off a webstore, and then you paid a one-off fee that you believed was, say 10 Euros, but then next month there’s another 10 Euros being debited, and you’re not clear why. So again, you as a consumer have the right to charge back that transaction, if, when you’re signing on to the webstore, the terms and conditions aren’t clear.

And these are called reoccurring transactions. When you believe, as a consumer, it was a one-off transaction then these are currently taking every month off of your account.

So, these are some common reasons for chargebacks. So, now let’s talk about the process of the chargeback and what happens. So, as I’ve said, it’s all focused around the consumer or a cardholder. So, number one, the cardholder will look at his statement and not recognise the transaction, or maybe one of these issues he would have. So, he would then contact his issuer and explain to the issuer that he cannot identify this transaction. The issuer will then contact the acquirer with that information, and then the acquirer will then come back to you, as the merchant, and ask for evidence to prove that that transaction was valid.

So, it’s really important running your webshop, your site, that you keep records of the transaction with the merchant to prove that you know the goods and services sold, where they were sold, the services were delivered, so you have all the information you can supply back to the acquirer. Then the acquirer will send it back to the bank or the issuer, and then the issuer and the acquirer will agree with the evidence between them. So they will say that you have defended the chargeback or you haven’t defended the chargeback. If you haven’t defended the chargeback you need to refund the money back to the consumer, and that’s under the card scheme rules that we all operate under.

These are the terms and conditions. So, I hope that’s explained a little bit about chargebacks, the processes, and what’s involved in, being important in, the cycle. And remember, to help mitigate fraud and chargebacks yourself, I’d suggest you implement your own manual processes to ensure the transactions are valid.

You can implement 3-D Secure and you can automate all these processes with your bank and acquirer as well, to make it as easy and seamless for you as possible.

So, I hope that’s helped and thank you for listening to another Whiteboard Wednesday. Thank you.