Tackling the credit card chargeback problem

Years ago, I ran an e-commerce operation selling ink online. With every order, I made sure to ship with parcel tracking.

If you've ever ran an e-commerce store, you know that shipment tracking is necessary -- especially if the dollar value amount of your package is above a certain threshold.

On larger orders, I would even purchase insurance for that added piece of mind.

The burden of these costs were not passed onto the customers. Instead, the added costs of tracking and insurance ate into my profit margins.

99% of the orders are fulfilled without a problem. But occasionally, there was the odd order where I'd receive a chargeback.

Chargebacks generally fall into two categories: fraudulent and accidental.

In both cases, you need to address it.

For fraudulent chargeback claims, there's really nothing you can do. It's the cost of doing business unfortunately. Credit card companies almost always side with the customers, who, in many cases, truly didn't order from you. Instead, their cards were stolen and someone else had created the order.

The other type, which are accidental chargebacks, is equally frustrating. These were chargebacks which are initiated by customers who did order from you. In fact, sometimes they ordered and even left a review of how happy they were.

Unfortunately, by the time the credit card bill came, they had forgotten all about their purchase and in many cases don't even recognize your company's name on the bill.

In the old days, it was harder for customers to initiate a chargeback. They would have to call into their credit card company and manually do it. Nowadays, creating chargeback is easy and can be initiated with a click of a button from their online banking portal.

And herein lies the problem.

@levelsio on Twitter tweeted this out in late April describing the problem perfectly: https://twitter.com/levelsio/status/1652300067272003584?s=20

Americans use disputes as an easy way to get their money back after they change their mind on their purchase

On my sites only 10% of disputes isn’t fraudulent

But I lose 100% of disputes

Reading this and the various comments, I realized a simple solution was to allow customers to more easily ask for refunds.

In most cases right now, if you bought something and wanted a refund, you would need to email customer support. Most websites don't make it easy to request refunds. As a result, chargebacks become a much more attractive option.

A short URL in the credit card statement going directly to a page that describes the company behind the charge and with the option to request a refund is really the answer if you think about it. Right now, being already so easy for customers to initiate chargebacks, you really have to address this problem right where it starts: When they're reading their credit card statement.

With this in mind, I created Transactful. This simple app lets you create a refund page for your business, and has a refund status page for your customers to follow the progress of their refund request.

The cost for businesses accepting credit card transactions has gone up many times since I started making "internet money". PCI-compliance, fraud, and now in 2023 the chargeback trend seems to be on the rise.

Businesses like Amazon, which makes it incredibly easy to request refunds, understand that customer refund requests should be easy. This user experience of making it easy to request refunds will definitely need to be embraced to avoid the increasing costs of chargeback fees.