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How Should I Handle Chargebacks In My Competition Business?

How Should I Handle Chargebacks In My Competition Business?

When it comes to online competitions, most transactions go off without a hitch, and everyone’s happy. 

But what happens when a customer disputes a transaction? What should you, as an online competition company, do to reassure them and support this dispute? 

Tricky. But not impossible. 

As always, we’re here to help.

⚡️ What is a Chargeback? 

A chargeback is when a customer disputes a financial transaction that took place via credit or debit card. 

Here are some common reasons for such disputes:

  1. The Transaction was Fraudulent 

The transaction took place because someone unauthorised got hold of the right details to begin the transaction, thus taking money from the customer’s account

Or, sometimes…

  1. The Customer Believes the Transaction was Fraudulent 

You should always look into it, to be certain, but sometimes customers make mistakes. 

When a customer thinks a fraudulent transaction has taken place, it’s called ‘Friendly Fraud’. Cute.

Often this is just because of simple confusion: the player doesn’t recognise a transaction on their statement because of its name, or because another cardholder (their partner, for example) made the payment. 

  • Service Issues

Shipping delays, damaged or faulty goods, and technical issues can cause service issues, which lead to chargebacks. 

  • Incorrect Charges

If there’s a mistake made during the transaction itself, the consumer might make a chargeback. 

⚡️ A Chargeback is Not the Same as a Refund

Refunds are dealt with by the customer (your player) and the merchant (you). If they have a damaged product, or didn’t receive what they expected, for example, it might be on you to refund them. They’ll contact you directly, and no one else needs to get involved.

With refunds there are no extra fees, and you are able to fall back on your businesses’ refund policy. 

Chargebacks are generally made through the player’s bank. That will reverse the transaction completely. You, as the merchant, are only able to dispute this afterwards. 

The chargebacks process will also incur fees. 

⚡️ The Chargeback Process

Below, we’ve outlined the entire process of a chargeback, so you know what to expect if it ever happens to you. 

Knowing about the process can help you to prepare your business to stand your ground, if you ever need to dispute a chargeback. 

  1. The Consumer Disputes a Charge

Whatever the reason, the customer contacts their bank (known as the ‘issuing bank’),  to make a dispute about a transaction. 

  1. The Bank Evaluates It

The bank will consider the reason the customer has given for the dispute. Is it valid? 

  1. Credit Exchange

If it is valid, the bank grants the chargeback. This means that they pop a provisional amount of credit into the customer’s bank account. 

They’ll then contact your acquirer. 

Clarity Corner 🤓

The Acquirer – the licensed financial institution which provides a healthy backdrop to a payment gateway, mitigating any risk —for example, in the instance of a chargeback. They’re usually licensed with Visa and Mastercard. 

  1. The Acquirer Lets you Know What’s Happening

Your acquirer will charge your bank account and add a special fee, known as a chargeback fee, to the transaction. 

This fee covers the admin costs of the chargeback process. 

They’ll also send you a chargeback reason code: this gives the basic reason for the dispute, so you know where you stand and can gather the relevant evidence.  More on this in a moment.

  1. The Ball Is Now In Your Court

Now it’s your turn to have your say. 

You can decide whether or not to accept the chargeback. 

You are usually given an allocated time slot (10-30 days). If you do not respond during that time, you may be charged a non-response fee. To check what this time slot is, you’ll need to talk to your Acquirer.

  1. If You Disagree…

If you dispute the chargeback, you need to be prepared to give evidence. 

What this evidence is depends on your customer’s reasons for disputing the original charge. However, some examples are proof of the prize listing, proof of delivery, screenshots of your communication with the customer, and photographs of the prize on the day you sent it. 

You give this evidence to your acquirer, who gives it to the issuing bank. The issuing bank will review it. Then, it’s up to them whether they reverse the chargeback. 

If they decide to maintain the chargeback, the customer keeps their money. If they reverse it, the bank will return the amount, along with all the incurred fees. 

  1. The Effect Of A Chargeback

Mostly, chargebacks are nothing more than an administrative headache. 

But, if they KEEP happening, that’s when there’s a problem. It can cause a damaged reputation between you and your payment processor. 

⚡️ How do I Prevent Chargebacks? 

Sounds a bit tricky, but don’t worry. You can take measures to ensure your business is in the best possible position to avoid chargebacks. 

Communication is key, especially when it comes to handling customer complaints. Make sure you respond quickly and promptly to any queries and concerns your customers have. Also, ensure that you have clear billing, return, and refund policies, somewhere that the customers can see them. 

If you can, keep documentation of the prizes you list, the condition in which you send them, and the shipping information. 

Use a secure, well-tested payment gateway. Luckily for you, we’ve got our own. 

Finally, avoid the headache in the first place, by ensuring that you put a clear merchant name on your transactions. That way, when your name shows up in players’ bank statements, they don’t mis-recognise it and assume it’s fraud. 

⚡️ What to do if a Chargeback Occurs

Of course, this really depends on whether or not you’re happy to accept the fault and let the bank take the chargeback and associated fees. If you choose this option, remember you still have to respond to tell them it’s okay. Just make sure you respond in a timely manner to tell them this, avoiding late response fees.

The other option is disputing the chargeback. If you choose this path, these are the things you need to bear in mind: 

  • You’ll need evidence: before you dispute it, make sure you have enough solid, photographic evidence.
    Once this is good to go, approach your acquirer with the evidence. Directly address the chargeback reason code we mentioned before. 

  • Write out your argument: when you submit your evidence, you should also write a letter. This will act like a cover letter, in which you’ll carefully and clearly summarise why you are disputing the chargeback. Show them all the safeguards you have in place to protect your customers, and present the evidence that the transaction was fair.

     

  • Work quickly and efficiently: the most important thing is not to miss your acquirer’s deadline. If you do, you’ll lose the dispute by fault, and you might get charged extra.

You should know that this dispute can take time, and energy, so you have to be sure you’re in the right, before taking the time to dispute the chargeback. 

You must also bear in mind something called merchant liability.

Clarity Corner 🤓

Merchant Liability – merchants (that’s you!) are generally responsible for all chargebacks in a card-not-present (CNP) transaction (so, transactions over the internet). 

It’s because it can be harder to prove and validate transactions that happen over the internet. 

With this in place, you can dispute the claim, but you’ll need to be pretty solid with your evidence.

That’s why it’s most important to ensure that it doesn’t happen in the first place. At every transaction portal, include a request for the following information from your customer: 

  • Full Name 

  • Phone Number

  • Email Address

  • Billing Address

  • Shipping Address

  • Full Card Number

  • Card Expiration Date

  • CVV Security Code

Also include Address Verification Services to validate information and keep records of transactions, payments, customer details, and correspondence. 

⚡️Some Considerations 

The process of dealing with chargebacks as an online competition business shouldn’t be too different to any other chargeback process. It’s a CNP transaction, of course, so make sure you’re aware of the liability rules outlined above. 

The thing you do need to bear in mind is that people can be more mistrusting of competition businesses than they are of e-commerce more generally. That means you should take precautions to document all potentially relevant evidence before a chargeback even happens. 

Refunds can be complicated with prizes. Make sure you have a clear refund policy and set this up before you begin listing competitions. 

You should also use a clear, understandable name for your bank account, so that transactions appear in customers’ statements without any room for confusion. 

Finally, use a secure, encrypted payment gateway, like Zap Pay, to ensure that funds travel in style and safety. 

⚡️ We’re Here For You When The Going Gets Tough

But, we’re also excellent at running, promoting, and styling competition sites. 

Our experience in this field, our expert websites, and our slick payment gateway can help you to protect yourself against unwanted chargebacks. 

If you have any concerns, contact us today.