How to Fight Chargeback With Cryptos?

Chargeback is a protective tool that helps customers to avoid fraud or poor service from the seller. However, for businesses, chargebacks may mean high expenses. According to Chargeback911, the average chargeback value for a company is about $190.

In this article, we will tell you what a chargeback is, how it works, and how cryptocurrencies and PassimPay can help you not to get charged back.  

 

What is a Chargeback?

Chargeback means a refund requested by a customer. In rare cases, a bank may initiate a refund because of a technical failure or an employee’s mistake.

Chargeback is usually processed via the payment system used for the transfer. If it happens, forced transaction cancellation and return of the money to the client's account occur.

You get a refund only when paying for goods or services through acquisition. If a customer paid directly to a card or account, the refund is only possible through the court.

To get a refund approved, the buyer must have a heavy reason. A customer can get approval if the product was not delivered or arrived with serious defects. Another reason for a refund is a purchase made because of payment data theft. 

 

So, to sum up, there are three the most common chargeback reasons:

• Fraud.
• Customer dissatisfaction.
• Seller’s mistake.

 

Chargeback Procedure

Several parties are involved in a Chargeback transaction: a customer, a company, the bank that issued a buyer's card, the acquirer (the merchant's bank), and the payment system.  

Refund processing takes place in several steps: 

1. The buyer applies for a refund to the issuing bank specifying transaction info, documentary refund justification, and evidence: screenshots of chat with the company, a copy of the appeal to the police in case of fraudulent transactions with the card, etc. 
2. The issuer evaluates the validity of the claim. If approved, the information is passed to the payment system, which, in turn, conveys it to the acquirer. 
3. The acquirer may start its investigation and request additional information from the other parties. If the issuer confirms the withdrawal, the funds are transferred from the company's account to the customer. If there is a dispute, the payment system acts as an arbitrator. 
4. The company has the right to dispute the return and send the acquirer proof of its rightness. In this case, the situation is reconsidered, and the evidence is sent to the customer. 
5. If the customer rejects it and the bank considers the company's evidence insufficient, the payment system again acts as an arbitrator and makes the final decision.

All Chargebacks are executed and disputed according to the rules of the processing payment system. 

Business Costs For Charbacks

If a customer applies for a refund directly through the bank instead of contacting the seller, the business loses payment for the order. Moreover, the company experiences material and reputational losses associated with the refund.

If someone requests the company for the money return, it can offer a replacement of the service or product, a bonus, discount, paid subscription renewal, a special offer, etc. Chargeback via the bank does not allow the business to negotiate the solution with the customer. More than that, the company not just loses money but also incurs additional costs:

• transaction processing fee;
• payment system fee for the chargeback;
• a fine if the company has no proof of its case;

 

For example, when using Stripe, the company pays a $15 chargeback fee, while in PayPal, the fee amount depends on the currency of payment.

Chargeback makes it impossible to offer solutions directly to the customer and retain their loyalty, which damages their reputation.

Finally, too many chargebacks can lead to problems with the acquiring bank. The payment system penalizes the merchant's bank for too many chargebacks. In response, the bank may impose sanctions on the company, including the total denial of acquiring services.

 

How to Avoid Chargeback 

These are several tips that help to avoid chargebacks:

1. Make a detailed goods and services description, including the purchase terms. In particular, it is essential to specify the characteristics and dimensions of the products, the criteria for free shipping, the terms of paid subscriptions, and automatic payment charging. 
2. Provide buyers with a convenient way to contact the company and report the issues. Try to respond to complaints and questions as quickly as possible.  
3. Capture confirmation that the order has been completed fully and in good faith.

These tips will help to prevent your business from chargebacks and reduce costs. However, this does not help eliminate chargebacks. One of the best ways to protect from chargebacks is using cryptocurrency. Crypto payments are irreversible, and refunds processed via an acquirer or a payment system don't mean high fees.

 

Combat Chargeback With Crypto Payments

Cryptocurrency is a reliable tool to sell your products or services without a chargeback risk. All transactions are recorded in the blockchain network and cannot be changed, deleted, or reversed.

Due to this feature, contacting the seller and negotiating is the only way for a buyer to resolve any issue. That means any business gets more leeway in managing the conflict. Much worse is to dispute through a bank or payment system.

Another advantage of accepting cryptocurrency payments is a lower likelihood of fraud. It is more difficult to gain access to the private keys required for payment than to the payment data of a regular bank card. 

 

Solving the problem of Chargeback

Accepting cryptocurrency payments is especially beneficial if you sell goods or services overseas. International bank transfer fees are 4-5%, while PassimPay charges 0% for deposits and from 0.5% to 3.5% for withdrawals. The exact fee amount depends on the business sphere, turnover amount, currencies preferred, and other aspects. 

We cover all the business’s tasks related to payment processing: receiving, keeping, and sending. With PassimPay, you can not only eliminate a chargeback risk but also expand your payment method selection, introducing your business to the new audience, geos, and markets.

You can learn more about PassimPay’s cryptocurrency payment gateway and the advantages of crypto processing services on the PassimPay website and our Telegram channel.