Ecommerce stores always need to be prepared to fight issues, small and big. 

One such issue is chargebacks. 

Consider these facts collected from Chargeback Field Report 2022:

• 75% of eCommerce stores saw an increase in online fraud attempts in 2021
• For every $1 lost to chargebacks, eCommerce merchants lose $3.75
• 6 out of every 1000 transactions are chargebacks

Wondering what chargebacks are? How do they work? And what Shopify chargeback prevention strategies could you adopt?

This blog is your go-to guide for chargeback prevention.

What are chargebacks?

Many times customers may raise a dispute regarding their order or transactions directly with the bank. For example, in case of delayed deliveries, damaged product deliveries or an error while processing a transaction, or when there’s an online fraud, etc. In these circumstances, the banks force money to be returned. 

In the above process, merchants are charged fees or have to incur some costs. These are called chargebacks. In short, chargebacks are forced reversal of transactions. Chargebacks are payments that banks reverse to credit or debit cards due to disputes. Chargebacks usually occur between merchants, consumers, and banks that issue the cards. Avoiding chargebacks in retail eCommerce is a critical requirement. 

See this image that shows chargeback lifecycle:

Image source

5 Shopify chargeback prevention strategies

Here’s a fact. You cannot completely avoid chargebacks in retail eCommerce. But you can definitely put prevention strategies in place to reduce their occurrence. In this section, we’ll go through some effective strategies to prevent chargebacks.

1. Encourage customers to sign up for a customer account 

One of the best ways to reduce chargebacks on your Shopify store is to set up a customer account page. Wondering how that can help in reducing chargebacks? Let’s look at some use cases:

• When you encourage customers to sign up, you can ensure mostly serious customers would sign up. Random users might not bother to go through the signup process. This way, you can ensure more authentic customers, and hence, a lesser number of chargebacks.
• Another way customer account page sign up can reduce chargebacks is because the customer account helps build a long-term relationship with customers. You can build trust and a good rapport with customers by interacting with them, and providing support when they need it. A strong customer relationship helps keep issues away.
• Moreover, customers can easily track their orders via the customer account page. This reduces post-purchase anxiety or any doubts about deliveries from their minds. Thus, reducing chargebacks on your Shopify store. 

Explore Flits Customer Account Page App to set up a comprehensive customer account. 

2. Mention refund, cancellation and return policies clearly

Another eCommerce chargeback strategy to reduce chargebacks is to clearly mention your refund, return, and cancellation policies. It will help in reducing chargebacks on Shopify in some cases. For example, if customers cancel their orders and are still charged or if certain transactions were not recognized. 

• You can have these policies in a prominent spot on your Shopify store; for example, on the product pages or before the checkout stage

• Ambiguous or confusing refund and return policies can generate doubt and mistrust in customers. Due to this, they might think of chargebacks as the best option for saving their money. This is why, mentioning clear policies can help reduce chargebacks

Pro tip: One Shopify chargeback prevention method is to collect data about which customers are raising frequent refunds and returns because they may be taking advantage of you and you might be incurring chargeback costs.

3. Provide quality customer support

Imagine a customer has a query regarding a transaction they just made on your site. However, they aren’t able to get in touch with you. Maybe they couldn’t find your contact details or they found your contact channels but there was no response from your end. They might think your Shopify payment security cannot be trusted. Feeling frustrated they request a chargeback.

Such situations can be avoided by ensuring efficient customer support. It can help avoid matters turning into chargebacks.

Here’s what you can do:

• Provide customer support options such as live chat, phone number, WhatsApp chat, email, Messenger, etc.
• Ensure your customer service agents are well trained to resolve customer queries
• If you have chatbots, ensure your system knows when to transfer the automated chat to a live chat agent
• Let customers know ways in which they can contact you in case of queries

4. Ensure authentic customer sign-ups

If you have only authentic and serious customers signing up on your Shopify store, you can avoid unpleasant situations, including chargebacks. Make this one of your key Shopify chargeback prevention strategies. 

Here’s how it works. With authentic customers you can avoid fraud and fake transactions, and thus, keep chargebacks at bay.

Here are some other tips:

• Keep a regular check on your contact list quality by performing checks and removing redundant contacts
• Enable social sign up so that you can ensure authentic customers
• Regularly create campaigns requesting customers to update contact details. That way, you will have authentic customers who want to stay associated with your brand

Keeping a check on your contact list is also one way to ensure Shopify store fraud prevention. 

Also read: How To Protect Your Online Store From Fake Signups And Bots

5. Ensure customers’ payment details are updated

You may be allowing customers to save their card details in the Shopify customer account page. While this is a good practice and can improve customers’ shopping experience, if not maintained properly, it could lead to chargebacks.

For instance, say customers’ cards expire and they forget to update their cards. It is possible that the card still gets used on your site and this may result in chargebacks.

To ensure expired card details are always updated, put into place automated systems that help you address this issue. Conversely, you could remind customers to keep their payment and expired card details updated. Put together a campaign to educate customers regarding this Shopify chargeback prevention strategy.

What is your Shopify chargeback prevention plan?

A single chargeback could cost merchants around USD 190. That’s a huge cost and could eat into your profits. 

If you want to start reducing chargebacks on your Shopify store, you’ll need to start with the most basic strategies. Your first step should be to set up a comprehensive customer account page on your Shopify store. It will help ensure quality customer sign ups and build a sustainable rapport with customers.

To get started, explore Flits customer account page app for your Shopify store.