Freelancers and business owners need to safeguard their payments to ensure the smooth running of their businesses. Due to fraud and chargebacks, there would be a loss in finances as well as your reputation. By understanding these risks and addressing them, you can protect your earnings and build stronger client relationships.
In this article, let us explore the strategies that can help you protect your business from fraud and chargebacks.
What are frauds and chargebacks?
Fraud involves intentional deception for financial or personal gain. For example, clients could provide false payment information, misrepresent themselves, or use stolen payment methods.
Chargebacks, on the other hand, occur when a customer disputes a payment, requesting their bank or card provider to reverse the transaction. Although some chargebacks are legitimate, others can be fraudulent-often called friendly fraud. In some cases, clients may claim that they did not receive services even after receiving the deliverables.
Both these issues can disrupt your cash flow and require significant time and effort to resolve.
Also Read: How to create an international virtual account in just 5 mins?
How does chargeback fraud happen?
Certain dishonest customers are typically involved in chargeback frauds. Some of these common tactics include:
- Claiming that the services were never delivered.
- Denying the authorization of the transaction.
- Exploiting vague payment terms to demand a refund.
This type of fraud can harm your finances, your ability to accept payments, and your reputation as a trustworthy professional.
What are the different types of chargebacks?
Chargebacks typically fall into three categories:
- Fraudulent chargebacks: Stemming from unauthorized transactions.
- Friendly fraud: Clients exploiting the system.
- Merchant errors: Mistakes like duplicate charges or incorrect billing.
Tips to protect yourself from frauds and chargebacks
There are certain tips that businesses and individuals can follow to prevent chargebacks-
- Clearly state your refund, return, and cancellation policies
You need to clearly mention your refund, return, and cancellation policies so that the customers are fully aware of them during the purchase. By providing transparency, customers can avoid chargebacks resulting from cancelled orders, or disputes related to “transaction not recognized” or “incorrect transaction amount”.
If you have an in-store business, display policy details on receipts or train sales personnel to verbally remind customers.
- Leverage technology for efficient management
For goods and service exporters, managing recurring transactions and integrating automated tools can greatly enhance efficiency. Real-time risk assessment, along with behavioral analysis and automated compliance reporting, enables you to efficiently manage cancellations, renewals, and payment reminders without hassle.
These tools ensure both your clients, and you have a smooth transaction experience by reducing manual errors as well as preventing misunderstandings and chargebacks.
- Focus on better customer service
Make your customer service contact details easily accessible on your website, printed receipts, delivery dockets, and other relevant materials. This not only reflects good business practice but can also prevent simple inquiries from escalating into chargebacks.
Make sure your procedures for managing billing queries and customer claims are efficient and proactive on a regular basis.
- Use secure payment methods
Using a secure payment method can prevent you from frauds and chargebacks. A reliable platform ensures smooth payments and offers essential features to protect businesses from fraud and disputes.
Look for payment processors that provide buyer and seller protection, which can help resolve issues fairly in case of conflicts.
- Maintain comprehensive records
Always keep detailed records for every project. Save signed contracts, invoices, payment confirmations, and any emails or chat messages outlining the client’s requirements.
It’s also a good idea to keep proof of completed work, like screenshots, timestamps, or links to files. Having this documentation in hand can make all the difference if you ever need to dispute a chargeback.
- Handle recurring transaction cancellation
Cancel recurring transactions as soon as a request is made and always provide written confirmation to the customer with the effective cancellation date.
If the customer has prepaid for a subscription or membership with specific terms, remind them of any applicable cancellation restrictions. When appropriate, offer alternative payment options to cover the remaining duration of their subscription or membership. Proactive communication can help prevent misunderstandings and disputes.
Also read: How can payment links streamline international transactions?
Winding up
Fraud and chargebacks can disrupt your business operations, but you can significantly reduce these risks by being proactive and vigilant. By implementing these strategies, you can foster trust with your clients and protect your earnings.
A secure payment process not only safeguards your financial health but also contributes to long-term business success.
