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Chargeback risk (10)

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Hi,

Just curious if anyone tried using virtual cards to make orders in bulk for your own store to decrease the chargeback rate, what'd be a good solution to automate this process if any?

I've had customers who just filed chargebacks without contacting support, some of them bought multiple items. This seems like obvious fraud but Stripe doesn't seem to care and just sided with the fraudsters even after providing evidence like tracking info. And even though I won a few cases, the chargeback record still remains and Stripe holds money or may close the account...

Any suggestions?

thanks!

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Stripe isn't who determines whether or not a chargeback is valid. Chargebacks are determined by the issuing card, unless it goes to arbitration. That is who you need to convince that it was valid.

https://www.valuepenguin.com/credit-...ng/chargebacks

https://www.chargebackgurus.com/blog...hy-they-matter

Please note, my advice and that of these sites is geared towards US transactions, consumers and merchants. It could be different elsewhere. I once had a friend in Europe complain to me about all the chargebacks he got from the US. So I presume it works a bit differently there.

Now, to the question. I am confused how you using a virtual card to make bulk purchases will protect you from a consumer chargeback.

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This is not going to protect him. What he wants to do is increase his volume of sales so that he decreases the percentage of chargeback amongst the total.

This raises 2 issues:
- you will pay extra Stripe fees of 2.9% + $0.30 on a sales volume you actually do not generate.
- you will generate fake extra sales, which you might not be able to offset with expenses, leading to increased income and associated taxes

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Got it. It sounds like an incredible bad idea to me. Instead I would focus on what is causing the chargebacks. Outside of fraud, which is rare, there is usually a reason that relates to customer service or the product itself.

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also while you may come under your CB transaction thresholds if you do the virtual/friendlies , there's no viable way of lowering CB volume threshold (i.e $1000 charged back out of $25,000 processed) which will also get you shut down.

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I don't know about using virtual cards to order your own merchandise in bulk, but the idea of getting more "good" transactions to reduce the chargeback rate can work. I've seen it done first hand.

It was done with a "tripwire" product - a digital product that cost such a low amount, that massively overdelivered, that nobody would ever bother to do a chargeback on. Not even the assholes.

For physical products this would be difficult to do due to shipping cost. But if you could somehow come up with the right digital product and sell that at a low cost, in a way that breaks even on ad spend, then you could get on Stripe's good side - at least until the digital product saturates and you need to look for a new one.

Ultimately though, like @iwanttofly has pointed out, figuring WHY customers are doing chargebacks, and implementing measures to avoid them doing so, is key.



Amy


Sent from my iPhone using STM Forums

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Thanks for the info @vortex. I guess it can be pulled off. However, that really wasn't the same as ordering yourself. That was just massively overdelivering on a cheap product to ensure a good ratio.

Even ignoring the fees and shipping hassles, there is a very good reason to avoid fake purchases. I'll touch on that at the end.

Your best bet long term is to identify why you are getting chargebacks and correct that. And while there is always some level of fraud, that usually isn't what causes a lot of chargebacks. Everyone knows there is fraud and expects to see some level of it, but when chargebacks get out of line, that indicates the problem is elsewhere. Also, chargebacks that are too high as a whole for the company will put the merchant services provider's account in jeopardy with their bank or even the network such as Visa, Mastercard, etc. It indicates that there is a failure to meet customer expectations somewhere.

Here are a few good ways to prevent chargebacks. While you should fight them, as you can see a merchant rarely wins. So it is much better to avoid them in the beginning.

https://help.Shopify.com/en/manual/p...ng-chargebacks

https://www.chargebackgurus.com/blog...ne-chargebacks

https://paymentdepot.com/blog/fight-...mall-business/

Over deliver on customer service, make sure the customer knows how to use the product, and generally be easy to reach and friendly. Also, consider a very generous refund policy. That will convert some chargebacks to refunds, but that is ok as a refund is better than a chargeback. Also, done properly you'll have a lower overall rate of refunds and chargebacks.

https://www.websitepolicies.com/blog...-refund-policy

Look to how large businesses handle things. Earlier this year one of my credit cards offered a promotion for 3 free months of Amazon Prime in order to get me to sign up for it. Since that time Amazon has consistently emailed me about how to maximize the value of Amazon Prime. All in hopes that I allow them to charge me for a full year after the trial period runs out. You don't have to go to that extent, but there are lessons there.

If you have a physical product, email when the order is placed, email when it is being processed, email when it is shipped, email the tracking number, and follow up after received. And again, always make yourself easy to contact. You can also find out a lot from your customer service. You'll find the objections people have to buying, where there are flaws in your sales funnel, where there is confusion about your product, etc.

If you have a digital product or service, email when the order is placed and quickly email the digital product if that is how you are fulfilling. Also, email about the product or service. Let people know how to use it, how to get the maximum value. If they have to log in, email if they aren't logging in, email to make sure they know how to log in, and email tips on how to maximize their value. You want to almost make them feel guilty if they aren't using the product. You might even go so far as to offer to refund them since they aren't using it. That part would be pretty bold, but if it is a great product or service, you'll nail customer satisfaction and referability.

Now, why ordering yourself is a bad idea...

Please note I'm not saying that this will happen, but it can and there is no reason to subject yourself to this when you could just avoid it all in the first place.

Stripe is subject to Anti-Money Laundering. https://stripe.com/en-sg/guides/payfacs
Whoever issued your virtual card is probably subject to AML, as is whatever bank you use.

You start running a bunch of transactions to bump your sales volume on Stripe and you may just trigger a red flag at any one or all of these. Then depending on how much it is and who gets interested, you could find accounts frozen while you explain yourself to the appropriate authorities. And while I don't believe this is necessarily illegal, I have a strong suspicion it would violate the terms of service for Stripe and your VCC. So even after you vindicate yourself, you could still lose your Stripe account and maybe even funds in it.

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Thanks for all good advice. I'm still not sure how to prevent assholes who just file chargebacks after receiving products and don't even contact support and don't even return the items. We sell physical products AOV $200+. The contact info of support is on every page on the website... Vortex' suggestion to sell digital products to boost the sales volume sounds promising though. Thank you.

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Hi Amy,

What'd be a good way/traffic sources to promote a digital download/ebook in foot ailment niche? I took a quick look at native ads running, using https://affbank.com, and can't seem to find offers that sell info/digital products.
FB would probably ban the account sooner or later for promoting health related products and Google also doesn't seem to allow certain keywords related to some symptoms. Any success case studies you could refer me to?

Also wondering if you can recommend a platform to use for retargeting in health niche?
I tried using Adroll but they haven't been able to fix a bug for WC integration..

Many thanks!

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^This. There are still probably ways to do this, much like how blackhatters set up tons of FB or Google accounts using virtual machines / different devices, different cards, different IPs etc. to avoid leaving a foot print. But as always, if you get caught, there will be repercussions - which in this case will likely be way more serious than just getting some FB accounts banned.


Of course it isn't the same thing - that much should be clear from the first sentence.

"I don't know about using virtual cards to order your own merchandise in bulk, but the idea of getting more "good" transactions to reduce the chargeback rate can work. I've seen it done first hand."

Likewise - thanks @iwanttofly for all the info!


You've pretty much listed all the sources I would have suggested. Can also try youtube. As for retargeting, I don't have much experience with that outside of social and google.

Ultimately though, when it comes to promoting ANYTHING related to health, almost all advertising platforms are becoming stricter when it comes to making false/exaggerated claims etc. I would suggest to do some massive spying on major competition to see what they're doing. We all know how retargeting works - just go to relevant sites and do relevant searches and relevant ads will start appearing everywhere. Start taking screenshots of the ads. If you're still seeing the same ads a few weeks later it means they didn't get flagged - which would be a good sign.

In ads: Try to stick to facts. And try to use customer testimonials.



Amy

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