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Avoid Preventable Chargebacks During the COVID-19 Crisis

While fraudsters are leveraging the pandemic crisis to commit more fraud, the increase in volumes, shipping delays and struggle to manage certain inventory is creating a unique set of problems. If not managed properly, merchants will see an increase in preventable, non-fraud related chargebacks and disputes. Here’s what merchants can do:

1) Set clear expectations

Fulfillment issues are on the rise. Whether due to not being able to keep inventory of certain sought after goods in stock or fulfillment and shipping delays, impatient consumers can be unforgiving and quick to file a dispute with their issuing bank. Now more than ever, it is important to set realistic expectations and clearly message to customers that shipping may, or will, be delayed.

Don’t overthink it. A simple message such as “Our warehouse is overwhelmed and experiencing delays,” or “Due to increased demand we are constantly re-stocking, creating longer than usual fulfillment times for certain items,” can go a long way. Everyone is overwhelmed right now, your customers can relate. Frequent customers may expect the same fulfillment and delivery time frame they are used to if this isn’t clearly messaged upfront.

2) Don’t settle payment until the order ships

Merchants should be doing this anyways, but don’t process the charge until the product is leaving the warehouse. When a customer sees a charge post to their credit card statement they will expect delivery within a few days. If a customer sees a charge posts to their statement several days after they placed the order online, they will reset their expectation of when to expect the goods to arrive. Don’t count on customers to keep up with this by looking at their card statements, it is better to message them directly.

3) Communicate shipping events as they occur

Communication with your customers does not end with the order confirmation email. Merchants should now be sending additional emails, maybe even text messages, confirming that an order has now shipped. Merchants should consider sending multiple shipments per order rather than delaying the whole order due to inventory issues with one or some of the items included. Depending on the order value, merchants should also consider using shipment methods that include package delivery tracking, providing tracking numbers in shipment notification emails or SMS text messages. To that end, be sure to send shipment notifications with each partial shipment until the entire order is fulfilled.

4) Stay ahead of chargebacks with Issuer Alerts

Even when taking these extra measures, consumers who are experiencing more stress, and in many cases lapses in income, are more likely to file disputes. In these cases, the best thing merchants can do is stay ahead of the disputes by using card association resources or Issuer Alert services.

Card association tools include services like the Visa Merchant Purchase Inquiry (VMPI) system, which allows merchants to view and respond to cardholder claims before the issue becomes an official dispute or chargeback. Issuer Alerts services also notify merchants of pre-chargebacks. In both cases merchants have time to either resolve the issue with the cardholder or cancel and refund the order if it hasn’t yet been shipped. Even if the merchant ultimately cancels and refunds the order, they avoid the chargeback fee and avoid the hit to their chargeback rate.

© The Fraud Practice LLC 2012