Which Types of Businesses Are Most Frequently Impacted by Chargebacks?
One of the major headaches businesses deal with today are chargebacks. While chargebacks are an important consumer protection feature and many are legitimate, they are also becoming a tool for fraud. Frequent chargebacks are particularly damaging to businesses and can result in higher fees from your payment processor or inability to obtain a merchant account.
To learn more about the basics of chargebacks check out our previous Insights post on the topic here https://www.beekash.net/insights/what-are-chargebacks-and-how-can-you-protect-your-business
To go in-depth about the type of businesses that are most frequently impacted by chargebacks, keep reading! The factors that show an increased risk for chargebacks fall into the following categories: industry, business model, location, and business history.
There are certain industries that consistently have a higher than normal chargeback ratio. Since these industries tend to have so many chargebacks, they are unfortunately labeled as high-risk and have higher payment processing fees. These industries include, but are not limited to:
Adult products or services
And many more…
In addition to certain industries, there are certain types of business models that have high chargeback ratios. Recurring billing or subscription based billing for products or services is a business model that attracts frequent chargebacks. Additionally, mobile applications are marketplace/auction businesses also face increased chargeback risk.
The location of your business can also impact your chargeback ratio. Businesses in certain countries or that operate in certain localities will have a higher chargeback ratio. Businesses that operate internationally or accept multiple currencies are also higher risk. Any business that operates outside of the EU (European Union), United States, Canada, Singapore, Japan, Australia, or South Korea is flagged as a higher chargeback risk.
The size, history, and age of your business is also a factor in chargeback assessment. Larger businesses that are processing large amounts of volume tend to have more chargebacks, where newer businesses may deal with more chargebacks because they simply don’t know how to protect themselves from chargebacks.
Helping Your Business to Avoid Chargebacks
Although your business may fall into the category of high-risk or may be plagued by an increased chargeback ratio, all hope is not lost. There are ways to tackle chargebacks head on and implement a system to minimize them. Finding a payment processor that values your business and focuses on security can help your business minimize chargebacks. A good payment processor will help your business implement a chargeback management system.
Beyond working with your payment processor, it is important to have good business practices that can mitigate your chargeback risk. These steps include:
Prompt response and issuing cancellations or refunds
Quick customer service responses
Outlining a clear and concise refund policy for your customers
Diligent shipping methods and policies that include package tracking
Clearly and accurately describe goods or services
The tools and tactics used by fraudsters is ever changing and evolving. They say that the best offense is a good defense and the same can be said when it comes to fraud prevention for your business.
Want to work with a payment processing partner that puts the security of your company first? Apply Today!