The Plan for Merchants to Reduce Chargebacks
Blog post from Basis Theory
Chargebacks occur when cardholders ask issuers to reverse payments because of third-party fraud, friendly fraud, or merchant errors such as undelivered goods, misleading descriptions, or difficult refund procedures. They cost merchants revenue, inventory, and fees, and rising chargeback rates can trigger withheld funds, monitoring programs, fines, account termination, and loss of card-network access, with a ratio above 1% of transactions posing particular risk. Merchants can reduce avoidable disputes through robust payment verification, recognizable billing descriptors, transparent transaction and subscription terms, accessible customer service and refunds, charging only after shipment or delivery, delivery signatures for valuable orders, and analysis of chargeback reason codes to identify recurring problems. Using multiple payment service providers may further lower exposure by supporting local currencies and preferred payment methods, assigning higher-risk transactions to specialized processors, and distributing transaction volume so individual accounts remain below chargeback thresholds.
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