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Chargebacks are real growing threats to online subscription-based businesses. Chargebacks damage customer relationships, drain revenue, and also challenge businesses to process payments.
Chargebacks can also incur penalties and fees from banks or other payment processors. A chargeback is when a customer identifies any unauthorized transaction. S/he requests the bank to revoke the payment made to the business.
In a subscription-based business, the transaction amount is high. So chargebacks can be costly. Thus, such businesses must use chargeback prevention strategies to avoid financial disputes.
Moreover, connecting with financial organizations that specializes in helping both the customers and businesses strike a deal would be beneficial to both. Take for example Chargeback911 has been in the market servicing clients for this specific need. Click here to know about Chargebacks911 and understand the challenges and solutions of chargeback prevention for subscription-based businesses.
Challenges of Chargeback Prevention
Take a look at the four challenges of chargeback prevention.
On various occasions, customers may raise a chargeback request. These can be
- Receiving a damaged / defective product
- The disrupted flow of online service
- Subscription not renewed
- Not receiving a product at all
- Delay in delivery time.
In such cases, customers may ask for a full refund.
This is one of the rampant challenges of subscription-based online businesses. Fraudsters use stolen credit card information for purchases. These result in chargebacks when the rightful card owner notices unauthorized transactions.
Lack of Evidence
Some subscription-based businesses may lack transaction evidence.This happens when online businesses do not keep track of the transactions. They also lack a proper customer service system.
Complex Dispute Resolution Process
The dispute resolution process can be time-consuming and complicated. Subscription-based businesses deal many transactions daily. It becomes a real hassle to resolve multiple chargeback disputes.
Solutions for Chargeback Prevention
Let us look at the seven most popular solutions and tools for chargeback prevention.
Fraud Detection Tools
Subscription-based businesses must install fraud detection tools. These could be
- Card Verification Value (CVV) checks
- Address verification systems
- Fraud filters
These help online businesses identify and signal against any suspicious or malicious transactions. Review these verification methods before approval.
Improve Customer Service
Good customer service reduces the possibility of customer disputes. The right customer interaction service can include:
- Providing clear and brief product descriptions
- Timely updates on the services
- Offering refunds for glitches in the subscribed product.
Filing of Records
Subscription rates are usually higher. Thus transaction records are important for businesses. These records include customer details, orders, and delivery information. These documents act as proof in case of any chargeback issue against the business.
It is recommended for online businesses to set chargeback prevention alerts. to receive notifications when a customer dispute arises. Businesses can take immediate action and provide supporting proof to avoid a chargeback. Customers are also relieved of unwanted hassles to get their money back.
Subscription-based businesses should have clear and precise policy terms and conditions. This avoids a lot of chaos about subscription offers, refunds, and cancellations. It also helps to avoid customer disputes and manage customer expectations..
Collaborate with Payment Gateways and/or Payment Processors
Collaborate with reputed payment gateways. Payment processors dispute resolution assistance, fraud detection tools, and chargeback management services.
Invest in Reputed Chargeback Prevention Services
Invest in a reputed chargeback prevention service. They help manage the end-to-end process. These professional services manage, prevent and resolve all chargeback complaints. This in turn allows businesses to focus on their core operations.
Subscription-based Businesses That Can Use Chargeback Prevention Tools
Several businesses face chargebacks depending upon their industry and type of subscription. Challenges and solutions for chargeback prevention apply to these industries.
Online Streaming Services
There are numerous OTT platforms like Netflix and Amazon Prime Video. These can face chargebacks from customers about recurring subscription fees.
Online Education Service
Online courses and tutoring services are subscription-based. These businesses face chargebacks if customers challenge the quality of content. Customers might also feel that they did not receive what was promised.
Several businesses offer monthly subscription boxes. These could be for clothes, food, or beauty products. Customers can dispute the quality and quantity of their items received.
Fitness or Wellness Programs
Subscription-based fitness programs include swimming clubs or gym memberships. Customers can issue chargebacks if they feel dissatisfied with the services provided.
Software as a Service (SaaS)
Accounting software or project management tools are usually subscription based. Customers raise chargeback issues about the functionality or features of the software.
Subscription-based businesses must provide top-quality products/services and have transparent billing processes. They must maintain every transaction record and excellent customer service. These act as prevention tools against chargebacks.
Chargebacks can harm the reputation of any subscription-based business. If you have an online business, make sure you go through the terms and conditions.
Moreover, make sure to keep your card and transaction details safe and secure. Never share them with anyone. It can cost you a fortune.
Can you charge back on a subscription?
Yes, you can. Chargebacks can happen with all types of service-providing businesses.
What happens if a subscription-based business accepts a chargeback?
The funds are returned to the cardholder, and the bank levies a chargeback fee.
What does chargeback management software do?
Chargeback management software helps companies reduce the risk of transaction fraud.