Payment Gateway Queries: How to Prevent Fraudulent Chargebacks on your Online Store

Ever tried to recharge your mobile number online and the amount never got credited? Weren’t you worried that you might never get the money back?

Now that you are an entrepreneur with an online store you must surely be worried about fraudulent transactions, charge backs and crimes that could possibly be happening through your payment gateway. After all, your customers are going to purchase your products through it.

Well, don’t worry! It isn’t all that scary and there is an easy way to manage it. Now, let’s hold on to our chairs and go fight some crime!

What is a Chargeback?

You are jubilant over a huge order you received the other day. Days have passed and you have sent the products to your customer already. But then, suddenly you get an email from the payment gateway team stating that the customer has asked for a refund. Well, my friend, you have been charge backed!

Any customer who does a transaction through a credit card can claim a refund of charged amount from the bank up to a certain period of time. Charge back is the term used to call such a claim.

Whenever a charge back is claimed, the customer’s bank informs the payment gateway provider which in turn notifies you.

      How does it affect me?

Getting charge backed regularly decreases the your credibility as a store owner. Also, each time you are charge backed, your transactions are put on hold. This is done till the time the amount charged back is recovered from your current transactions or you are able to prove otherwise, whichever is earlier.

Why would someone charge me back?

A customer can claim a charge back for many reasons like:

– Non-delivery of goods

– Defective product

– Dissatisfaction from service

– Fraudulent transaction from customer’s card

How to avoid a chargeback?

Better safe than sorry! It is always better to avoid a charge back than fight one with your payment gateway provider and your valuable customer. You can avoid charge back by following simple steps :

a. Be approachable to your customers

Remember when a customer is not satisfied with your product/service, they are likely to come to you before reach out to their bank. Make sure you have a strong support system and address customer queries on time so that they don’t feel cheated by your online business. Always acknowledge their concerns and do a quick follow up to resolve the issues early.

b. Maintain a register

Keep record of your orders and invoices till at least 6 months as that is the maximum time period allowed for customers to claim a charge back. Having record of proof of delivery will help you defend yourself from claims.

c. Be active on Social Media

Have a good rapport with all your potential customers through social media. The brand’s image brings perspective into the customer’s mind. Repeated complaints will bring down the trust in your brand and that will adversely affect even handling genuine cases of delay in providing service.

d. Don’t be vague with your Terms and Conditions

Write up a good Return Policy. Your Terms and Conditions should clearly define the circumstances under which you are willing to refund the customers so as not to allow notorious persons to make false claims.

What happens when a chargeback is claimed?

As soon as a customer claims a charge back, the customer’s bank issues a request to your payment gateway provider.

-The payment gateway provider will notify of the claim and will ask you to provide the proof of delivery of product/service.

-If you haven’t delivered the product, you can refund the customer’s money from your payment gateway dashboard and inform accordingly.

-Suppose a charge back of Rs. 1000 is raised, then the payment gateway will deduct that amount from your next transactions until the entire amount is covered.

-Once you provide all the necessary proof of delivery for your products, your payment gateway provider will take the process on your behalf and you can start receiving full payments through your gateway.

 Can there be any other claims of refund other than chargeback?

Yes, even those transactions done through Debit card and Net banking can be claimed against the store owner by a customer. The customer can directly go the payment gateway and raise a charge against the store owner under any of the reasons already mentioned above.

The resolution process in this case remains the same as that of a chargeback and you will be asked to provide a proof of delivery of the product.

How often are chargebacks claimed?

Due to the implementation of 3D secure by RBI, the chances of fraudulent transaction are greatly reduced. Thus, it also reduces the chances of chargebacks being claimed as purchases have to be authorized by the customer for the transactions to take place.

Does the payment gateway provider protect me from fraudulent transactions?

Payment gateways in India follow PCI DSS version 2.0 standards that prescribes high security protocols to safeguard you from fraudulent transactions. They also implement Risk Management Systems in their servers to handle fraudulent transactions occurring through invalid cards, known suspicious IP addresses, spam E mail IDs, etc.

In some cases, where the payment gateway team feels there is risk in the transaction that has taken place on your store, they request you to provide your customer’s identity proof. This is an additional security measure to protect your business from fraudsters.

We hope this clears off some of your doubts regarding payment gateway risks. If you feel suspicious of any transaction at any point of time, you can always reach out to your payment gateway support team or to our support team to help you with the same.

Happy selling 😀

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