When people think of ‘high risk merchants’ they automatically think of adult entertainment, online gambling and weapons dealers. However, high risk merchants come in all shapes and sizes, from airline and jet charters, antique vendors to moving & transportation carriers. The only things they really share, are tough terms and high rates for their financial transactions.
If your business is considered high risk by banks and credit card companies, it can make payments a real pain. Customers payments are more likely to be blocked as ‘false positives’, it can be difficult to open merchant accounts with leading retail banks, and credit chargebacks are all too common. It is important for all retailers to take steps to reduce the risk of expensive payment chargebacks to increase their ROI, and improve the chances of negotiating a better transaction fee from a bank or payments processor.
One of the most common reasons for approved chargebacks are the use of unclear billing descriptors — the company information which shows up on a consumer’s credit card statement. If customers who purchased products online can’t quickly and easily identify the billing descriptor as belonging to your company, their knee-jerk reaction is to call their bank and put a stop on the payment.
So what impact do wrong or unclear billing descriptors have, and how can companies take steps to protect themselves?
Why are unclear descriptors costing your company money?
A billing descriptor is the form in which a company’s name appears on a credit card statement and is generally set when a retailer opens a merchant account. The descriptor is used by the customer to identify who a payment was made to for a particular transaction. The name used is usually the trading name of the business so that it is easily recognizable by the customer, or a dynamic descriptor which includes the name of the service or product sold.
Selecting a clear billing descriptor is important for a merchant to avoid chargebacks. According to our data from thousands of chargeback cases, unclear descriptors can increase chargebacks by up to 25 percent, since customers are unable to identify the merchant, and immediately assumes the charge must be invalid or due to fraud.
When a chargeback happens, merchants lose nearly twice the transaction amount when considering the product cost, marketing cost, fulfillment cost, transaction cost and chargeback fees. The process to appeal chargebacks is complicated, time consuming and merchants win just 21 per cent of disputes.
Wrong descriptors can also spike transaction decline rates by as much as 10 percent. If a company receives a high volume of chargebacks –more than 1 percent of transactions — a bank or payment carrier is more likely to decline payments in ‘false positive’ cases, in an attempt to reduce online fraud. When companies fix their descriptors, and make them more clear to consumers, our data shows a drop in decline rates by as much as 2 percent.
But aside from costing companies money in chargebacks and payment declines, unclear descriptors can ultimately affect brand trust with consumers. The internet provides a new level of transparency for customers, who can leave reviews and comments on websites such as Yelp and Trustpilot, which are readily available for millions of other potential consumers to see.
If a business has a bad roll of declined payments, valid chargebacks or cases of online fraud, it increases the chances of having their ‘dirty washing aired in public’ with negative feedback and reviews, which in turn could turn potential customers away from using a service and push them into the welcoming arms of competitors.
What steps can retailers take to reduce the risk?
As soon as chargebacks start becoming commonplace, time is of the essence and businesses should contact their bank or payment processor immediately. Here are some simple steps which retailers should take to minimize damage and lost custom:
- Talk to your processor/bank to change your descriptor so that customers can identify the product, company or service they opted for. Many companies make the mistake of using the name their business is registered under, rather than its commercial name, but this can confuse consumers. It is best to use the most commonly known name for your business, or the name of the product, so it is easily to remember for clients.
- Do a test transaction and see how the descriptors appear in your credit card statement. It is always better to be safe than sorry, so it is a good idea to process a payment using a company card and then check the online banking service to confirm the new billing name is clear and concise when shown on a consumer’s bank records.
- Request your processor to include your phone number, company name and address in the second line item of the descriptor. Many companies choose to use these dynamic billing descriptors which offer more information. While not all banks and payment carriers may allow this, is it always worth requesting.
- Ensure your descriptors are searchable in Google. If not, purchase a domain in the descriptor name. Businesses should then include the new domain name on their products and website landing page. Companies who want to go the extra mile can also undertake SEO strategies so that their website is visible on a Google search.
Credit card chargebacks have risen by more than 20 percent over the last year, and are estimated to have cost retailer $5.8 billion in 2016. These charges are hitting smaller merchants –both brick and mortar and E-retailers– the hardest, which are directly affecting their bottom lines. It is up to retailers to take all of the steps in their power, to make the payments process as clear, and simple for consumers as possible, to reduce chargebacks and help their business grow.
About Suresh Dakshina
Suresh Dakshina, CEO, Chargeback Gurus
Suresh Dakshina is President of Chargeback Gurus, a leading chargeback and fraud prevention company with over 13 years of experience. He is a Certified Payments Professional and a Certified Chargeback & Fraud Management Professional. Suresh has a Master’s from the University of Southern California and you can connect with him on LinkedIn.
About Chargeback Gurus
Chargeback Gurus helps merchants fight and prevent chargebacks and fraud. With over 13 years of experience, Chargeback Gurus is an industry leader with a win rate in chargeback cases that’s over two times the industry average. They recovered $15 Million last year for e-commerce businesses. Connect on Twitter and LinkedIn. Please visit the website here: http://www.chargebackgurus.com/