Continuing our payments education series, it's time for the letter C. And if we're talking important payments basics, C can stand for nothing other than 🚨 Chargebacks 🚨
Chargebacks occur when a cardholder disputes a transaction, thereby kicking off a process that affects both merchants and their payment processors. While chargebacks are designed to protect consumers from fraud or poor service, they can also easily become a significant challenge for businesses of all types.
Here's the basic flow: A customer disputes a charge because they don't recognize it on their bank statement, didn't receive or weren't satisfied with the purchased product, or suspect fraud. The issuing bank may try to resolve it with an inquiry, but if that doesn't work, they submit the chargeback with a reason code explaining the customer's issue. The merchant then has a choice: accept the chargeback or fight back by presenting evidence that the charge was valid.
Going through this chargeback process—regardless of whether you accept or fight the dispute—can mean paying additional fees, losing revenue from sold goods or services, or even potentially facing future challenges with your payment processor. But for merchants, knowledge is power! By understanding chargeback reason codes and common dispute triggers like fraud, product fulfillment, or return policy issues, you can take proactive steps to prevent excessive disputes from causing long-term damage. When chargebacks do occur, having set customer service processes in place and documented records of consumer interactions can provide you with a strong case when you do fight back.
How does your business handle chargebacks? Let us know! And if you want to dig deeper into your chargeback data, Pagos can help you monitor incoming chargebacks and find ways to minimize their impact on your business.
CPO & Co-Founder at Pagos Solutions
1moDwayne Gefferie hope you don't mind a bit of linking back to the awesome things you share! Thank you for that!