How to Win Disputes and Chargebacks in a COVID-19 World

One of the many unintended side-effects of government-instituted procedures to combat the spread of COVID-19 is the tremendous spike in chargebacks and disputes.

Disruptions in the global supply chain and deliveries, staff shortages during the lockdown, and negative cash flow have resulted in significant delays, and sometimes total failure, in delivering goods and services.

No industry is exempted from the economic shocks of the pandemic. According to Statista, the global Gross Domestic Product (GDP) monetary loss could reach 76.7 billion U.S. dollars.

As companies scramble to deal with this reality, consumers turn to disputes and chargebacks to reclaim the monies they spent on the purchases affected. In some cases, even when goods are available, consumers still go ahead and file chargebacks due to other issues such as financial tensions or health and safety concerns.

Disconnects between financial institutions and merchants deepen chargebacks huddles.

The COVID-19 pandemic distorted life as we knew it. One research indicates that many industries are suffering chargeback losses ten times higher than before COVID-19. The T&E sector tops the list, with airlines such as Monarch Airlines and Thomas Cook Airlines experiencing over 100 times their anticipated exposure to chargebacks.

Chargeback procedures were already significantly distorted due to the industry’s fragmented nature before COVID-19 added an extra layer of complexity to the process. The Papers reports:

“Often the information received by an issuer from a consumer is diluted and altered as it moves from the issuer to the card association, then to the acquirer, perhaps to another merchant service provider or ISO, and finally to the merchant. Merchants lose valuable context by the time it reaches them. And given the compressed chargeback response timeframes imposed by card schemes, many merchants struggle even to identify the original transaction, let alone respond to it. Without merchant feedback, issuers may incorrectly assume the claim was legitimate, closing the case with a permanent refund to the cardholder. With a lack of standards between acquirers’ chargeback processes, along with the increased challenges that cross-border payments bring difficulties in identifying the underlying cause of a business’ chargebacks are vast and varied.”

And as you would’ve guessed, this has opened a floodgate of fraudulent COVID-19 chargebacks. For business owners that are already struggling to keep their heads above sea level, COVID-19 induced chargebacks present significant threats one might not easily surmount. You can’t play it cool. Experts have hinted that Chargebacks across all business verticals would increase by at least 20% as states fully open.

How to win COVID-19 chargebacks with ease

I know what you’re thinking. The prospects of safeguarding your business from chargebacks do not look quite bright. To speak absolutely, it’s not all gloomy. But you must take decisive actions to combat the threat of COVID-19 chargebacks and its ancillary costs. Here are some useful recommendations:

Get educated about prevailing card scheme chargeback rules and don’t fall prey to Chargebacks and Disputes.

The card networks have issued new guidelines for chargebacks because of COVID-19. It pays not to add additional salt to injury due to an ignorance of these new rules when you cannot immediately refund the customer. For instance, Mastercard’s new chargeback rules give, among others, that when a service is available, and the cardholder willingly declines the use of a purchased service due to concerns related to COVID-19, the transaction will not be subject to a chargeback.

Further, protect your business against a spiking chargeback rate by reducing the volume of fraudulent transactions you process. Fighting chargebacks cost money and time. By reducing fraudulent transactions, you can dedicate your resources to serving real customers and growing your business. Here’s another thing: reducing your fraudulent transactions can help you avoid excessive chargebacks, which can land you in trouble with your payment processor.

Communicate, be flexible, and work with your customer to find a reasonable win-win outcome

Many businesses are understaffed due to the restrictions imposed by the lockdown rules. As a result, customers are finding it difficult to interact with these vendors. One survey found that the primary cause of the increased COVID-19 chargebacks that merchants experience is a lack of communication with customers. Whatever your reality is, we recommend that you aim to resolve disputes directly with customers and not wait to face the cost of disputing a transaction and paying out a chargeback when a customer demands a refund from their network. When you realize the customer deserves the refund they ask for, do the needful. It’s smarter to make a full refund than paying the lump sum as a chargeback and the additional associated fees.

Equally important, you can avoid COVID-19 chargebacks by working with your customer to find ideal solutions when services are disrupted or in cases of delayed delivery. Consider issuing extra credit notes or writing off client fees, in addition to making refunds for failure to deliver a service.

Automate your chargeback and disputes management

Britannica traces the origin of the term automation to D.S. Harder, a 1946 automobile executive at Ford Motor Company. Harder describes it as the increased use of automatic devices and controls in mechanized production lines. Automation in any situation achieves three crucial things: providing superior outcomes, easing the burden of completing mundane tasks or eliminating costly manual labor, and lowering cost.

And Chargeflow’s disputes and chargebacks management software gives you the best value on both angles. We provide you with an intuitive piece of technology to manage and grow your business. Our chargebacks and dispute automation service cost 45% less than manual, in-house processes while giving you an industry-high win-rate of 85%!

This post was first published on the Chargeflow blog. There’s more where this came from.