Businesses can suffer short- and long-term if chargebacks are not handled properly. Every time a customer initiates a chargeback, you stand to lose money in one of two ways: either through a reduction in direct revenue or, if the customer is particularly shady, through a reduction in both direct revenue and the value of your product or service.
Chargeback is a term used to refund the money the merchant charges. Sometimes, the reason for the chargeback is false charges or fraudulent activities. In this case, the customer will request a refund, and the merchant must return the money.
The best way to avoid chargebacks is to ensure you have a positive experience. However, chargebacks are only sometimes good for businesses; knowing how to handle them properly can benefit your business.
Here are the main reasons why chargebacks are bad for business.
If the customer finds that they are being charged the wrong price or has been charged without their consent, then the customer will request the chargeback.
The merchant can lose money due to these fraudulent activities, leading to the loss of the customer.
Lack of Customer Trust:
When the customers are chargeback, they lose trust in the merchant. They will only buy from that merchant again, which can lead to a loss of a customer.
It takes work to regain customer trust.
The merchant needs to provide the right experience to the customer. The customer will not come back to the merchant for the next purchase.
Lack of Loyalty:
If a customer requests a chargeback, the customer is unsatisfied with the service. It will create a negative experience for the customer.
It will also create a bad impression of the merchant.
When the customers request chargebacks, it creates a bad image of the merchant.
It will create a negative impression of the merchant and the brand.
Chargebacks: Why Do They Occur?
This could be any one of several different things.
Errors of a Technical or Clerical Nature
This may be the result of a mistake made by a person or by the system itself, and the consequences may include the following:
- Accidental double billing.
- An expired credit or debit card.
- An incorrect amount was billed.
- Errors are made at the end of the issuing bank.
- An authorized refund that the customers never received.
Discontentment of the Customers
Customers dissatisfied with their purchases may file a chargeback request if the product is of poor quality, they did not receive their order, they attempted to return the item but were denied, or they did not authorize the transaction in the first place.
Chargeback, also referred to as “Friendly Fraud.”
This can occur on the part of the merchant, the customer, or a third party. Even though they are pleased with the products they purchased, certain customers will still try to get their money back by filing a chargeback.
In the above points, you can understand that chargebacks are sometimes good for businesses. It depends on the merchant how to handle the chargeback.