Monica Eaton-Cardone, Co-Founder of Global Risk Technologies and American subsidiary Chargebacks911, explains how golf pros selling products online can protect themselves against chargeback fraud.
The annual bill for UK retail crime soared to £613m last year – the highest level since records began, according to the British Retail Consortium’s annual survey. The rise of cyber criminals and sophisticated criminal gangs ‘stealing to order’ dominates the headlines. Yet, while these are serious threats to the well-being of UK merchants, including golf retailers, more insidious types of criminal activity can also erode hard won profits. The phenomenal growth of chargebacks being one such example.
The recent figures from Financial Fraud Action UK reveal that retail financial fraud losses grew by 26 per cent in 2015 versus the previous 12 months. The research further highlights the growth in payment card fraud, up 18 per cent over the same period to £567.5m; the value of card-not-present (CNP) fraud, including chargebacks, was up 20 per cent to just over £398m.
While much attention is typically given to other types of fraud and theft, chargeback fraud is a growing trend. Many retailers have tolerated it though, however reluctantly. I was myself a merchant and know first-hand the irritation and impact chargebacks have on a business. When I set-up Global Risk Technologies in response to the issues my business encountered I discovered I was not alone: chargebacks should not be accepted as just another part of a retailer’s life.
So what exactly is chargeback fraud? A chargeback is a process initiated by a customer to reclaim funds they did not authorise to leave their account, or recompense for goods which did not arrive, were damaged or were not as advertised. It is the right of a UK consumer to initiate chargebacks to goods costing less than £100.
The customer’s bank will generally give the cardholder credit when he or she initiates a chargeback process. Sometimes the cardholder can be an honest customer who is making a genuine claim, but at other times the buyer is malicious or criminal in intent. For example, if a customer buys a new putter, balls or golf shoes, then claims they did not receive them, they may instigate a chargeback with their bank rather than contacting the seller for a refund. This is bad news for online retailers because chargebacks would not only cost you the sale price, but also the cost of golfing equipment supplied.
A staggering 86 per cent of chargebacks are fraudulent and many consumers often bypass the sellers to file complaints directly with their banks. I believe chargebacks are generally a learned behaviour and that most golf enthusiasts do not intentionally attempt to get something for free the first time there is a dispute. However, once they profit from a chargeback, many are tempted to repeat the process fraudulently. Within our industry this has become known as ‘friendly fraud’.
The problem is that the more fraud perpetrated by consumers, the more businesses need to raise prices to cover for these losses – it can be a perpetual cycle where everyone loses, including genuine customers. You might conclude that the time to fight a chargeback against a £20 set of golf balls does not make commercial sense and so the loss has to be written-off. However, as a golf retailer, the market is extremely competitive and margins can be tight. So what can be done?
A few quick steps to tackle chargebacks:
Improved customer service – honest customers might contact you directly about an issue they have with their order. If your staff do not show concern and present a solution to the issue, the customer will look for a resolution elsewhere, which might be to get satisfaction through a chargeback. So a customer service policy that staff have been trained in and is presented clearly on marketing materials are two steps that can be acted upon quickly.
Be responsive – make sure that any customer issue is dealt with promptly. If a complaint is made outside working hours, clearly state on the website or on voicemail when you will respond to the issue. Remember, customers want a resolution fast and many have no hesitation taking it direct to their chargeback if they feel they are being ignored or if it is an effort to reach you.
You do not need to accept chargebacks as just a part of your life as an online golf retailer. It is possible to take effective action and give your business a healthier profit margin.