The A-Z of e-commerce

Introduction: A chargeback occurs when a credit card holder disputes a charge on their statement and requests a refund directly from the card issuer. Originating as a consumer protection mechanism, chargebacks protect customers from unauthorized transactions and unsatisfactory purchases. However, for businesses, they can represent a significant challenge, leading to lost revenue, additional fees, and potential damage to their reputation.

Reasons for Chargebacks:

• Unauthorized Use: Transactions made without the cardholder's consent, often due to stolen or lost credit cards.
• Non-Delivery: The customer claims the purchased goods or services were never received.
• Quality Issues: The product or service received did not meet the customer’s expectations or was significantly different from the description.
• Clerical Errors: Duplicate billing, incorrect amounts charged, or refunds not processed properly.

Implications for Businesses:

• Financial Loss: Besides losing the sale, businesses may incur chargeback fees and, in severe cases, increased payment processing rates.
• Operational Disruption: Addressing chargebacks requires time and resources, diverting attention from core business activities.
• Reputational Risk: High rates of chargebacks can lead to scrutiny from payment processors and diminish consumer trust.