Receiving a chargeback is an unpleasant situation for every online store. This process basically consists of the request to cancel a payment transaction made by the cardholder to the issuing bank. After that, the bank notifies the acquirer, who then informs the payment processor or the merchant. The purchase’s amount is charged from the merchant’s account and returns to the cardholder. Not only does this result in financial losses for merchants, but also in penalties from card acquirers and banks, who fine merchants with higher levels of chargebacks and may even cancel the merchant’s account depending on the chargeback rate.
And why do cardholders file in chargebacks? One of the reasons is the cardholder does not recognize the purchase. In these cases, he may have been a victim of fraud or simply did not recognize the name of the store in the credit card’s statement. Another reason for filing in a chargeback is not receiving the product or service. Further, the cardholder may also commit auto fraud and willingly request a chargeback, even if the online store has delivered the product or service correctly.
In Brazil, filing in a chargeback is relatively easy: the country has one of the strongest legislation for consumer protection in the world.
What are consumer rights in Brazil?
First introduced in 1990, the Brazilian Consumer Protection Code has been updated several times. Online stores must also comply with the legislation, which states, among its 199 articles, that the customer is entitled to compensation for any wrongful charges. In addition, article 49 states that the customer has the right of retraction within 7 calendar days.
Therefore, to file in a chargeback, the cardholder must simply get in touch with the issuing bank to initiate the process. And, with the advance of digital financial services, this process is easier than ever, and customers may file in a chargeback with just a few clicks through the credit card’s app.
How to prevent chargebacks on your online store
Chargebacks are inevitable, and eventually, every ecommerce business will face this situation. The best way to mitigate chargeback rates is through preventive actions. Working with a trusted antifraud solution is one of them.
However, there are other actions merchants selling to Brazil may take to reduce chargeback rates.
Provide clear information about the delivery process
Many consumers file in chargebacks because they believe the purchase is taking too long to arrive at the destination. This may occur for merchants selling import goods to Brazil – such as cross-border online stores or drop shippers – or when there are problems with Correios that are beyond the merchant’s reach – such as a strike. Therefore, it is crucial merchants state the estimated delivery due date at checkout and provide customers a tracking code. In addition, if there are any problems during the delivery process, merchants should send regular updates via e-mail or SMS.
Optimize your soft descriptor
A soft descriptor is a message that identifies the purchase on the card statement, which may be customized in the merchant’s payment interface when provided the option. It is important to customize this feature in a way the customer may easily identify the purchase – usually with the store’s brand name.
Refund the client
Refunds are a good alternative for chargebacks, as it generates lower processing fees and avoids penalties from banks and card acquirers. Always provide a refund policy and a proper support channel for customers in order to avoid chargebacks.
In addition, another way to reduce chargeback rates in Brazil is offering domestic payment alternatives. PagBrasil, for instance, offers Boleto Flash®, which provides automized refunds for the same day.