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Best practices to minimize chargebacks

Defending against a chargeback not only proves to be a lengthy and costly process, but it also raises your dispute rate with the respective card network. Additionally, banks prioritize protecting their cardholders from having to pay for something they didn’t authorize or feel was misrepresented or damaged.

Therefore, it is important to recognize that most chargebacks can be attributed to improper transaction-processing practices and can be prevented with appropriate training and attention to detail. To assist in minimizing chargebacks, we provide the following best practices:

Provide good customer service

  • For pre-arranged transactions, always provide merchandise or service within the required time frame. If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
  • Communicate clearly regarding stock availability. If the cardholder's ordered merchandise is out of stock or discontinued, notify the cardholder in writing. For out-of-stock items, indicate the anticipated availability and delivery timeline. If the merchandise is discontinued, offer the option of either purchasing a similar item or canceling the transaction. Do not substitute for another item unless the payer agrees.
  • For card-absent transactions, do not deposit transaction receipts with your acquirer until you have shipped the related merchandise. If payers see a transaction on their monthly statement before they receive the merchandise, they may contact their card issuer to dispute the billing. Similarly, if delivery is delayed on a card-present transaction, do not deposit the transaction receipt until the merchandise has been shipped.
  • If a payer requests cancellation of a transaction that is billed periodically (monthly, quarterly, or annually), cancel the transaction immediately or as specified by the payer. As a service to your payer, advise the payer in writing that the service, subscription, or membership has been canceled and state the effective date of the cancellation.
  • Prepare a complete Standards of Procedure (SOP) for Customer Service to process disputes as early as possible and notify payers about it.

Avoid irregular operation

  • Do not complete a transaction if the authorization request was declined.
  • Do not accept a card after its expiration date.
  • In a card-present situation, try to swipe the card properly. If, for any reason, you must key-enter a transaction to complete a card-present sale, make an imprint of the front of the card on the transaction receipt, using a manual imprinter. Do not capture an impression of the card using a pencil, crayon, or other writing instrument. However, this process does not constitute a valid imprint. You might still face chargeback due to fraud reasons.
  • Ensure that the transaction information on the transaction receipt is complete, accurate, and legible before completing the sale. An illegible receipt, or a receipt that produces an illegible copy, may be returned because it cannot be processed properly. The growing use of electronic scanning devices for the electronic transmission of copies of transaction receipts makes it imperative that the item being scanned be very legible.
  • If the cardholder is present and has the account number but not the card, do not accept the transaction. Even with authorization approval, the transaction can be disputed and sent back to you if it turns out to be fraudulent.
  • In the card-absent environment, do the proper verification you need to protect yourself from friendly fraud.

Website display

  • Provide your contact information, such as the telephone number of your registered office and e-mail address on your official website so that your payers can reach you easily.
  • Provide access to the shipping policy and return/refund policy on your official website to ensure your payers are fully informed before placing an order.

Other suggestions

  • If you are an indirect acquiring partner, you are responsible for managing your sub-merchants in complying with the above requirements.
  • You should retain the related transaction information for at least 360 days as supporting materials for dispute defense.
  • The quality of goods/services must be maintained.
  • You are to maintain the stability of your systems.