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Chargebacks Happen: Learn How to Handle Them Effectively

Chargebacks Happen: Learn How to Handle Them Effectively

Last year brought with it many surprises. With COVID-19 negatively impacting brick-and-mortar businesses, more and more merchants moved online by creating an eCommerce website.

In fact, 2020 transformed how people sell and shop. Online sales broke records, growing 140% year over year when COVID-19 first hit, and reaching a climax over the holiday season.

The new year is finally here, and though 2020 taught us many lessons about how to sell online, one that needs repeating is how to handle chargebacks. As a merchant using Wix Payments, our native payment provider, there's a lot you can do to reduce your risk of chargebacks and handle them efficiently with minimum hassle.

Chargebacks, the Name Says It All

Chargebacks are, quite simply, disputes between the merchant and customer, in which the customer requests their money back through their banks. Sounds like a refund, right? Well, not exactly. Unlike a refund, which is a direct interaction between the customer and merchant, a chargeback is a demand from a bank that the merchant return funds to the customer.

There are many different types of chargebacks, and in most cases, a chargeback is requested when the customer feels they have a right to dispute the transaction. While this goes a long way to protect the customers’ rights, for a reputable merchant, it can be quite frustrating. This is why Wix Payments allows merchants to dispute chargebacks “in-house”, which we’ll cover a little further down.

Chargebacks happen.

With the global economy still feeling the impact of an uncertain 2020, the number of chargebacks caused by customer regret is high. As a merchant, this is something you need to know how to handle. Too many chargebacks can cause you to be classified as a “risky merchant” by your bank or payment provider. Of course, it goes without saying that regularly paying money back to customers is not an experience merchants enjoy.

Becoming a high-risk merchant can also mean changes to your payout policy, additional verification steps, and even your Wix Payments account being closed.

Whatever the reason for chargebacks, following best practices and using smart tools to handle them will ensure that all the work you put into your online business doesn’t go to waste.

Make sure you keep track of how many chargebacks you have, or what’s referred to in the industry as your chargeback ratio. This ratio is calculated according to the total number of chargebacks per total number of transactions. The industry standard for chargebacks is 1% (or less than 1 chargeback for every 100 completed transactions).

The math here is relatively simple: keep your chargeback ratio low and your business’ risk level stays low. There are a number of methods you can put in place to ensure that number stays as close to zero as possible.

Keeping Chargebacks at a Minimum

There are a few things you can do to help lower your risk of getting chargebacks, as well as handle any chargebacks you get more effectively.

  1. Make sure your product info is accurate. Your customers are less likely to dispute a purchase if they receive exactly what they order. Write product descriptions that are on point and add images that realistically depict what you’re selling.

  2. Add clear policies to your eCommerce website. Make it easier on customers to find your shipping, refund and cancellation policies, so they know in advance how you handle these issues.

  3. Customize your statement descriptor. Your online store looks more reputable and professional when your site’s business name matches the name that appears on their bank statement (meaning, your statement descriptor).

  4. Carefully analyze orders that seem suspicious. Chargeback fraud is a real problem. Now that shoppers are spending more money online than ever, you want to ensure that your business doesn’t fall victim to this phenomenon.

  5. Respond to refunds swiftly. Offering refunds to customers is a best practice, especially since COVID-19 has created a lot of anxiety and uncertainty in the world. Wix Payments charges no additional fees when you issue a refund, and offering this to your customers lessens the chance of chargebacks.

  6. Let your customers easily get in touch. Chargebacks can sometimes be a result of poor communication, so make it easy to find your contact details by displaying them clearly across your website. Also, try to respond to customer concerns quickly, and keep your customers updated about shipping, delivery and any changes to your store policies.

Understand Why Chargebacks Are Happening

As a merchant, staying informed is really important, and when it comes to chargebacks, you have all the info you need to stay updated—right in your Wix Payments dashboard. Some of the most common reasons for chargebacks are:

  • Fraud. In this case, a customer will claim that they were charged without their knowledge. If you have proof that they agreed to be charged, you should dispute the chargeback.

  • Products or services weren’t provided. Keep your customers up to date on when services will be provided, or when you expect products to be shipped and delivered. This helps pinpoint where the problem may be, and how you can improve your services moving forward.

  • Products are faulty or not as described. What you deliver to your customers should be exactly as described and pictured in your product pages. Whenever there’s a difference, even a small one, your customer may feel they’re not getting what they paid for.

Don’t Agree? Dispute the Chargeback

A chargeback isn’t always fairly filed against a merchant. If you have proof that the payment is valid, you should file a dispute directly from your Wix Payments dashboard. Note that Wix Payments doesn’t charge a fee for this—so feel free to dispute your chargeback claims whenever needed.

When challenging a chargeback, be sure to make a note of its deadline. This is the date after which your chargeback is considered final, and you won’t be able to change its outcome.

Also, get organized: prepare for a dispute by gathering all your documents. Note that they should be in English, a requirement made by most banks that process chargebacks. They should also be readable, so try to include good quality images and documents only.

From your Wix Payments dashboard, you can submit all the required documents. If you’re uploading multiple files, they’ll automatically be gathered and compressed into a single file. These may include:

  • Proof of delivery

  • Invoices and receipts

  • Customer communications

  • Photos showing the customer using the product

  • Your business’ Terms and Conditions

  • Your rebuttal letter

Wix Payments’ integrated dispute tool lets you monitor and review your chargebacks’ status right from your Wix dashboard. Track where you stand with every transaction, dispute chargebacks, upload additional documents and more. You’ll also get push notifications via SMS and email any time a customer disputes a charge.

Bottom Line

Whenever possible, it’s always best to try and avoid a chargeback rather than deal with it once it happens. But if it does happen, and it’s important to say that most merchants have to deal with chargebacks at some point (even if they followed all best practices to a tee)—the best way to handle a chargeback as a reputable merchant is to dispute it.

Every chargeback is unique, and you should handle it as such. Stick to best practices to reduce your risk ratio, and know that should you have to face a chargeback one day, you have all the tools you need in your Wix Payments dashboard to deal with it.

Ready to start selling online? Create your online store today.

Omer Shatzky

Head of Billing & Payments at Wix

Wix Payments Founder

Omer is a seasoned executive—leading tech, business and product groups within the payment ecosystem. As founder of Wix Payments, he’s developed an advanced solution, allowing merchants to manage their business operations and payments solely on Wix.

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