Shopify Chargeback Insurance

Shopify Chargeback Insurance

How to manage chargebacks as a merchant to prevent them

Update: Shopify Protect is now offering free Shop Pay fraud protection to all qualified US merchants.

Customers can dispute a charge on their credit card account by initiating a chargeback, which is a credit card payment cancellation that is handled directly by the bank rather than as a refund from the responsible store.

Why do payments get canceled?

This payback may be started for a number of reasons, such as, for instance:

Items Not Received: Customers who anticipate receiving their orders on schedule might request payment cancellations at a time when supply chain and shipment delays are pervasive.
Technical error: either a double load or an incorrect load count

Unknown acquisitions:

Typically, the business name on the card statement differs from the store name.
Customer Unhappiness: when customers purchase a product that isn’t what they expected
Scams: either by dishonest shoppers, such as the so-called “friendly scam,” in which a supposedly legitimate customer uses their own name, address, and credit card to make an online purchase with the express purpose of disputing a credit card charge to avoid payment, or when someone alleges to have been the victim of identity theft.

Across all credit card companies, refund disputes result in 2.59 percent of all transactions (e.g. American Express, Discover, Mastercard, and Visa). Each year, the e-commerce industry loses $40 billion.

Banks and card networks have valid reasons for establishing refund policies. They play a crucial role in consumer protection since some dishonest retailers try to take advantage of customers by giving them subpar, unlawful, or nonexistent goods.

However, if you provide a dependable product to your customer carefully, on schedule, and with the brand, and he expresses gratitude for the reimbursement service for the goods he did not receive, you can be confident that you will prevail in this disagreement.

Because it could affect your business, it’s not only a matter of principles.

Cancelling payments has a significant impact on your bottom line when your advertising budget has been used for purchasing, selling, and shipping to clients.

Chargebacks can also result in a disgruntled and rejected customer, unless it’s a “nice scam,” which can result in more than just pocket money. Customers who are irate frequently vent their dissatisfaction to friends and on social media. Over time, this might hurt the reputation of your brand.

Banks and credit card firms have procedures in place to examine refund attempts before offering them. The card issuer and bank may further scrutinize the applicant if the request sounds suspicious: Have requests to stop making payments been made frequently in the past? The request can be marked as fraudulent if this is the situation. Before being upgraded to the merchant notice level, these kinds of incorrect requests are often refused.

However, a certain proportion of bank and card company refund requests will be fulfilled. So, in the event that a complaint is made against you as a business, what occurs and what rights do you have?

Does the merchant have to give the money back?

Regrettably, when it comes to returns, retailers have no formal protection.

Most cashback rights for traders are preventative and designed to minimize losses. You should be aware of the following eight.

Refunds are limited to the original transaction amount and cannot exceed it. In some circumstances, the total cancellation cost can also include some shipping expenses and extra charges.
Cashback transactions cannot be included in refund reimbursements.
In the event that the purchased item is delivered after the scheduled delivery date, the customer should make an effort to return the item before asking for a refund.

Before reporting a payment reversal, the cardholder is frequently required by cardholder agreements to get in touch with the merchant and attempt to address the problem.
If a client returns an item, the card issuer is required to give the merchant a response window by waiting 15 calendar days before processing the payment cancellation (unless the waiting period exceeds the cancellation deadline).

The majority of cardholder agreements mandate that customers stop payments within a predetermined number of days.
Most of the time, each return stage must be finished before arbitration can begin.
The “Refund Submission” arbitration procedure gives merchants the option to contest reverse payments.

Your most crucial right in the refund process is the last one, representation.

Fighting chargebacks naturally gives you the chance to recover lost revenue, but in a way, this is a secondary benefit. Fighting fraudulent attempts to reverse payments is strategic for a greater reason.

Because they don’t have to worry about battling them, retailers who give up and merely accept fraudulent reverse payouts encourage scammers and may generate more refunds.

Yes, it takes time and effort to combat a payback reversal. To demonstrate the legitimacy of the first transaction, you must gather documentation. However, because you will eventually have fewer payments to make, you will save time and work by doing this.

A merchant’s reputation for turning down chargeback petitions will strategically discourage potential fraudsters from being overly eager to submit a chargeback. The same holds true for genuine consumers who will be more inclined to request a refund if doing so is quicker, simpler, and more effective than dealing with the difficulties of contentious payment reversals.

Reverse payments are not accepted, and this sends a clear message to banks. Merchants who persistently resist payment reversals will persuade banks to conduct due diligence rather than stamp payments returned. In addition to managing risk, cutting trading costs, and lowering the amount of fraud in the system as a whole, this will make the system more equitable for everyone.

How to prevent payment cancellation in advance of it occurring

It’s a fact that banks frequently side with cardholders over business owners in payment disputes. Therefore, it is crucial for businesses that their purchases and transactions are properly recorded and rigorously follow the card network’s standards.

But how can you stop chargebacks from happening in the first place?

To stop payments and time-lapse requests from being reversed, adhere to the general steps listed below:


Before executing questionable commands, look into them.
Informing customers of your store’s policies in advance
Make sure your product or service’s images and descriptions are precise and understandable.
Make your return policy more visible and clear in your store.

Make sure your statement’s text is simple enough for your customers to read. Make use of your company name or domain name so that clients may recognize it on their credit card statement.

To remind your customers of what they purchased, send electronic payment receipts.
Ensure that you return the funds as quickly as you can.

If you unintentionally charged your customer twice, immediately refund the second transaction and get in touch with them to explain what happened.
When customers contact you with issues, do so promptly.

You may only ship products for orders that pass AVS verification if you’re shipping real goods to the US, UK, or Canada. Before sending to an address that cannot be verified by AVS, you can also get in touch with the consumer.
As soon as the order payment has been received, send the merchandise.
Deliveries and dates should be projected as precisely as feasible.

Contact your consumer and explain the situation if delivery is delayed.
After the shipment has been sent, keep your consumer informed about the delivery procedure. If at all possible, use internet monitoring and delivery confirmation, especially when speaking with the courier.

Make sure to package and send your goods in a method that prevents harm in transit if you’re shipping a physical item.

Quickly respond to client inquiries and repair faulty or damaged products
Add a cancellation policy for your subscription-based services to your online shop.
If the customer requests it, promptly terminate your subscription and submit a confirmation.

Customers should be informed on your subscription registration page that they consent to routine billing, and you should give them a reminder before each bill.
Tools for fraud prevention are available if Shopify Plus powers your store, including:

Indicators of risk analysis

Each order includes a set of signs that can be used to investigate orders that, based on various behaviors, you suspect may be fraudulent.
Fraud analysis indicators, such as the similarities between these orders’ attributes and previous fraud orders seen, are examples. Only one credit card is used for payment. 520 kilometers separate the IP address location from the delivery address.

Support for third-party anti-fraud apps: Anti-fraud apps are available in the Shopify Plus Certified App Store. As they guard against criminals, these partners assist Shopify Plus brands like CurrentBody, Urban Industry, and iDrinkCoffee in lowering the possibility of false positives. The outcomes include an almost 30% rise in sales and a reduction of fraud attempts of up to 75%.

Fraud Suggestion: On the Orders page, if an order has a moderate or high likelihood of being refunded due to fraud, it will be identified with a warning icon next to the order number. The order can then be attempted to be confirmed, canceled, or the order sum refunded.

Online orders processed through Shopify Payments are assessed and categorised as “protected” or “unprotected” depending on whether fraud protection has been activated. Each protected order carries a cost, and Shopify ensures payment. If a refund for a secure order fails, you are under no obligation to take any action. Shopify will take care of the cancellation procedure and reimburse your cancellation cost.
Last but not least, quick execution also lowers the refund rate. You can be sure that your return rate will go down when you pick Shopify Fulfillment Network to handle your product storage and shipping operations since we get your things out quickly.

How to handle reverse payments when they happen

No matter how meticulously you adhere to the aforementioned instructions, you will receive at least some reverse payouts. So how do you respond when it occurs?

One option is to make sure you have numerous records that demonstrate the validity of the contested purchase. The ability to consolidate payments, receipts, shipping, and package tracking in one location is one of the reasons we developed Shopify Payments to operate smoothly with other services like Shopify’s Store App and Shipping.

Additionally, Shopify Payments’ automatic dispute resolution creates a detailed picture of every transaction and aids in your ability to prevail in disputes more frequently.

To maximize your chances of winning, Shopify Payments works well with your other Shopify services. Your profit margin rises from 20% to 37% thanks to our automated dispute settlement, which combines Shopify Payments and Shopify Shipping: Profit loss accounts for 17% of disagreements. 85 percent more victories relative to the same amount of work is almost twice as many wins. In fact, compared to its competitors, Shopify Payments prevails in 45 percent more chargeback disputes.

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