For every $1 you’re charged back, it costs you $3.36. After saving her clients $100M in preventable losses, Karisse Hendrick joins Pitstop to help you avoid fraud and chargebacks. The rules for online businesses aren’t fair, but you can prevent chargebacks
Things to take away from this episode.
1:30 Types of chargebacks. Service-related chargebacks are for things like an order not showing up, or not as described. Alternatively they call their bank and call fraud.
3:05 Card not present. When a fraudulent purchase is made in person, the liability is on the bank, but online that liability, even for fraud chargebacks is on the merchant.
7:58 Review the reason codes of your chargeback, but take it with a gain of salt. If there are common issues like “not as described, or order didn’t arrive” you can adjust your descriptions, follow up, etc.
9:06 Make it obvious who they’re buying from. This include on your credit card statement the part that shows up as “sp*yourstore.com”and can be edited in your Shopify admin under /admin/settings/payments https://monosnap.com/file/x3hFgYMYaEhaWCuZPzKp4Dvq97YsEV
9:20 Have a phone number, especially if your customers are a bit older.
12:00 For subscription-based businesses, Chargebacks can be issued for up to 3 months of services, and making it known you can cancel makes customers feel safe. Don’t make your customers feel like they’re ordering from an adult video store to cancel meat box subscription.
14:06 Having clear policies, particularly your refund policy. They can be an insurance policy for if you do get a chargeback. Being able to show what you did to help customers will go a long way.
Tactics to reduce service related chargebacks
- Work with quality suppliers and partners. Test your fulfilment centre, and make sure you’re working with one that offers a guarantee.
- Clearly communicate what’s happening with orders. If there are delays, or items are out of stock, don’t hide.
- Don’t act like an adult website for subscription based business, and make it easy to cancel at any time.
- Adjust your messaging on site, and through your pre-and post purchase automations.
Tools that will help you avoid chargebacks
Gorgias Help Desk. Set up your automations to tag any tickets with chargeback type language like “If I don’t hear from you, I’ll contact my bank.
Shipbob, who offers 99.95% accuracy rate in shipping orders, and has warehouses around the world.
Omnisend, I sat in the co-host seat of Season 3 Cart Insiders podcast, talking about automations and workflows. If you’re experiencing any changes, update your automations so your customers know what they need.
Fight Back Against Fraud
An inevitable part of doing business, there's no ecommerce scam Karisse Hendrick hasn't seen, and she's returned to Pitstop to tell you not only how to spot a fraud, but where and when to cut them off before they cut your purse strings and into your profits
Although the vast majority of chargebacks are both innocent and easily prevantable, what’s left are the real bad apples of the bunch, the fraudsters & scammers looking to either make a quick buck off your hard work, get some free merchandise or destroy you altogether for nothing more than a laugh.
Things to take away from this episode.
- 1:50 Fraud is inevitable. Sooner or later, your store will come to the attention of a fraudster who will try to take advantage of you. If you sell big ticket items or get a lot of press, expect them sooner than later. No one avoids being targeted forever, so be prepared and don’t get caught by surprise.
- 2:15 A bank transaction is not a guarantee of security. Just because the bank pushed the purchase and charge through doesn’t necessarily mean their client and your customer has the money, or intention, to cover it. That money may be clawed back days later, at your cost, so don’t rush to ship the order or count your cash. It is your responsibility as a merchant to recognize fraudulent activity
- 3:40 Be mindful of your orders. You may be overjoyed to suddenly be doing tons of business, but check the details and make sure the transactions are valid so they don't come back to bite you. Make sure there are no red flags before processing their order.
- 4:30 Legitimate customers and fraudsters act differently. Both online and irl, pay close attention to the details and clues both customers and suspected frauds leave behind while browsing, in the checkout and even post-purchase, to learn how to spot and follow the trail that leads back to them.
- 5:30 If you’re making a profit, they can make a profit. You may find it hard to believe that your boutique or niche brand may be targeted by professional fraudsters, but your success just proves that there’s a market for your product, which means there’s a blackmarket too. Even if you’re a small business with no highly valuable merchandise to scam, they can hijack your checkout to test stolen credit cards with minor, often random purchases.
- 6:25 Where there’s one, there’s bound to me more. Modern fraudsters and scammers are members of vast communities barely hiding among the social media and message boards many businesses rely on themselves for promotion. When one finds a weakness in a store, they don’t keep it to themselves for long, so you have to move quick to protect yourself first.
Tools and tactics you can implement tomorrow to protect your store
- 8:20 The best offence is a good defence. Consider hiring an indemnifying fraud prevention company, someone who will take care of the entire process from top to bottom and cover any chargebacks that get passed them. If you prefer a more cost-effective and hands on approach, train someone on-staff to work with a third party security and monitoring system, or one of Shopify's own security apps and services (though with warning as these apps can be very basic and sloppy)
- 9:06 Make it obvious who they’re buying from. This includes on your credit card statement the part that shows up as “sp*http://yourstore.com”and can be edited in your Shopify admin under “/admin/settings/payments https://monosnap.com/file/x3hFgYMYaEhaWCuZPzKp4Dvq97YsEV“
- 11:38 Use common sense. Stay calm, slow down, and think about the purchases your customers are making. Paying attention is your first, last and best defence for fraud prevention, and by far the cheapest.
- 12:05 Watch your flank. If a scammers senses that you’ve caught onto them online, they may switch to a different approach, like ordering over the phone. Be aware of the signs of social engineering, and don’t be afraid to ask questions if you get suspicious.
Get That Money Back
Having saved over $100 million from being lost to fraud, Karisse Hendrick joins Pitstop to give you the rundown on what to do to do win those inevitable chargebacks and fraudulent claims, and keep more of your cash
You've heard Karisse explain how to reduce the rate of innocent chargebacks and how to avoid making yourself an easy target for fraudsters, but what do you do if it's already too late, they've taken your money and your product, and you want it back?
Things to take away from this episode.
Service related incidents
- 2:14 Study the reason code attached to service related chargebacks. Know what you’re dealing with before getting into a claim with a customer, and don’t let yourself be caught off-guard. So long as the reason code given is accurate, having strategies to deal with the most common ones will save you time and money.
- 2:40 Dig into your data. Make your own case, the same way you would as a lawyer, based around the reason code given. Use their own shopping habits and freely given information as proof of continued and intended behaviour, or to contradict any claims they may make to the contrary. Trust what the data is telling you, and make others trust it as well, then link it back to that specific chargeback reason code given.
- 3:08 Don't issue refunds unless necessary. It may seem easy to just avoid the conflict and issue the refund, but this is a mistake that may cost you unnecessary charge backs for innocent mistakes or impatient customers, or see you become intentionally targeted as an easy mark at the hands of online scammers. Only accept the chargeback when it truly is the fairest option for your consumer
Fraud related incidents
All you have to do when it comes to dismissing chargebacks in cases when you suspect fraud or a customer claims it, legally speaking, is prove that the card holder asking for a chargeback did participate in the transaction, and all of that data is already safe in your hands. It’s just a matter of how you decide to use it.
- 4:46 Don’t just accept a claim of fraud. Just as before, trust your data, even if it’s saying everything is business as usual while a customer is claiming a recent purchase wasn’t made by them. If the package hasn’t been diverted, the payment was verified, and their contact info all tracks, call their bluff.
- 6:00 Know the rules and regulations. Again, knowing is half the battle, and that includes your responsibilities to the client, theirs to you, and both of your to the credit companies. Know your rights, know what is expected of you, and know how these rules will be used against you
- 6:50 Hire a third party security options or build an in-house team. Also previously stated, hire security and fraud analysts, do some shopping around yourself for who can provide the best protection for your products and profits, and see what you can do for yourself without spending even more
- 9:00 Beware of chargeback management companies. They may seem like the obvious answer for getting your money back, but frequently they’re too interested in their fee, ignore the context of a claim, and have cost others much more than a chargeback ever would have, says Karisse. Do your research, and go with a company that is transparent in how they work and what they do for you..
- 13:00 Additional legal options. If all else fails, consider action like third party collections or small claims court to recoup your money. Litigation is a nasty and expensive business, but if you feel you have a clear cut case, make it yourself and hope for the best