Key Takeaways:
- A surge in holiday sales also means an increase in chargebacks.
- Chargebacks should be avoided because they can negatively impact your business.
- Understanding fraudulent charges is the best way to protect your business this holiday season.
The holiday shopping season of 2022 is in full swing, and businesses are busy getting ready for the spike in demand.
Although the coming month could be incredibly successful for merchants, there are also hidden risks that could steal sales from those who are unprepared for them.
Increases in fraud, false positives, and chargebacks are frequently observed in conjunction with a sudden surge of holiday sales from new clients during the holidays.
What should businesses know, so they're ready for the best and worst of the holiday season?
We'll take a look in the article below.
Table Of Contents
High Chargeback Ratios And The Problems They Cause
Let's first examine what constitutes a high chargeback percentage and why it could be problematic for brick & mortar and online retailers.
Card issuers often view 1% as a high chargeback ratio, while each card brand has its own calculation and threshold. If your chargeback ratio rises even temporarily, card issuers may issue a warning before raising your rates, put your funding on hold, or require your business to maintain a reserve balance.
If you can't rapidly lower the chargeback ratio, it can be a headache for businesses with narrow margins.
If your charge ratio remains high, your acquiring bank may close your merchant account and include your company on a list known as the MATCH list.
If your company is placed on the MATCH list due to a high number of chargebacks, it remains there for five years. Any acquirer that you attempt to apply with for merchant services could see that your company is listed and charge you processing fees far more than usual, or simply decline your application.
Acquirers might turn down your business.
Why Do Chargebacks Spike After The Holidays?
For most merchants, the holiday season is their busiest time of the year. Therefore it makes sense that the period immediately after the holidays will see an increase in chargebacks.
The holiday shopping season has certain characteristics that can result in various types of chargebacks, which can cause a merchant's chargeback rate to rise disproportionally to their increase in sales volume.
Chargebacks may also rise due to increasing fraud, slow deliveries, and other problems. Although these chargebacks often increase after the holidays, they are not always exclusive to this time of year.
Simply put, more purchasing means greater opportunity for chargebacks.
Late Refunds
Customers occasionally make purchases and return things for which they receive a refund. If they don't receive the full amount, they may dispute the transaction with their bank or the bank that issued their credit card, claiming that they didn't get the money owed to them.
Order Discrepancies
This expression is being used loosely here. This refers to anything from legitimately wrong items to “wrong” items being delivered.
If consumers receive an item that isn't what they expected, they can complain to their credit card provider. This includes both incorrect order fulfillment and items that were not sent.
Holiday Fraud and Scams
After the holidays, con artists typically try to cash in on gift cards they received in exchange for "free" goods they are attempting to sell on eBay and Craigslist.
Even though scammers operate all year long, the holidays are usually a perfect time for them to strike. Identity theft and phishing schemes are also more prevalent at this time.
It’s easier than ever for fraudsters to create email templates similar to financial partners, reputable businesses, or security firms. These fraudulent emails typically contain hidden links in legitimate-looking CTAs requesting information used for social engineering purposes.
Once they have that info, they can use it to commit chargeback fraud or sell it to other fraudsters who will do the same. Fraudsters also acquire gift cards using stolen credit card information which they can resell to unwary customers and make huge profits.
This also covers friendly fraud, such as unrecognized transactions and buyer's remorse, which occurs when a customer regrets making a purchase. Friendly fraud can also include acts of promo abuse and return fraud. The latter frequently occurs after they have gone beyond the return window for your online store.
Always have an eye out for fraudulent activity over the holidays.
Poor Product Descriptions
A lack of detail in the product description might also result in chargebacks and negative customer comments or reviews.
It is possible that you could wind up with dissatisfied customers who will report you for fraud if the product descriptions you provide are unclear or confusing.
Damaged Items
Handling and care are sometimes overlooked due to increased deliveries, increased holiday consumption, demand for next-day international shipping, and other factors. Shipping companies are not always friendly to packages either.
However, when clients receive damaged deliveries, they typically hold you accountable rather than the shipping fulfillment company.
Late Deliveries
Nothing is worse than getting a package days after you thought it would be there. There will always be returns and refund requests if a shipment is late.
How Can Merchants Prevent Holiday Season Chargebacks?
First and foremost, it's crucial to designate enough resources to handle the increased demand for sales, fulfillment, and customer service.
Additionally, it is more crucial than ever to use anti-fraud tools and manually review flagged orders as they are received.
The customer experience is crucial for businesses over the holiday season. Many businesses will need to invest more in customer service as online sales increase. Customer service requests should receive a rapid response, and businesses should quickly address customer complaints.
Customers may be understanding about long delivery times, but persistence and kindness are only going to get you so far. Customers who don't receive a satisfactory response from a retailer will eventually start a chargeback dispute.
To prevent post-holiday chargebacks, you can also ensure your business is PCI DDS-compliant. This will help prevent common forms of credit card fraud and protect your business from unwarranted chargeback fees.
The holidays are not the time to relax your anti-fraud defenses, but it may be a good idea to evaluate your return and refund policy and be as accommodating as you can when clients wish to return an item.
Refunds are usually less expensive for businesses than chargebacks, and they can help win back a disgruntled or regretful customer's allegiance.
Contact EMS Today
Reviewing your payment procedures can also be a good idea as you prepare for chargebacks throughout the holiday season.
EMS believes the payment process should be simple for consumers and effortless for you. Our professionals can assist you in finding the ideal solution that offers these advantages and more.
Your business can utilize one of our comprehensive point-of-sale solutions to safely accept all payment methods, improve business processes, and streamline operations.
Our countertop credit card terminals are made to provide you with all the processing capabilities you require without taking up too much counter space.
EMS can also provide your company with an eCommerce solution so your customers can order products or make secure payments online.
At EMS, we understand how challenging it is to find payment processes that work best for you.
Partnering with EMS simplifies the entire process during the holiday season, making credit or debit card payments as quick, easy, and secure as possible.
With extensive industry experience spanning over 30 years, we’ll streamline the process and maximize your ROI on payment processing services.
Contact us today to find the ideal solution for your brick-and-mortar or online business.
